3 Stocks Pushing The Services Sector Lower

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The Services sector as a whole closed the day up 1.0% versus the S&P 500, which was up 0.4%. Laggards within the Services sector included Taitron Components ( TAIT), down 2.9%, Birks Group ( BGI), down 1.7%, Peerless Systems ( PRLS), down 2.6%, VirtualScopics ( VSCP), down 3.0% and RLJ Entertainment ( RLJE), down 4.0%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the sector lower today:

RLJ Entertainment ( RLJE) is one of the companies that pushed the Services sector lower today. RLJ Entertainment was down $0.14 (4.0%) to $3.36 on average volume. Throughout the day, 6,634 shares of RLJ Entertainment exchanged hands as compared to its average daily volume of 6,600 shares. The stock ranged in price between $3.32-$3.45 after having opened the day at $3.45 as compared to the previous trading day's close of $3.50.

RLJ Entertainment, Inc., an entertainment company, acquires content rights in British episodic mystery and drama, urban programming, and full-length motion pictures. It operates through three segments: Intellectual Property Licensing, Wholesale, and Direct-to-Consumer. RLJ Entertainment has a market cap of $48.2 million and is part of the diversified services industry. Shares are down 26.9% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates RLJ Entertainment as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on RLJE go as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Media industry and the overall market, RLJ ENTERTAINMENT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for RLJ ENTERTAINMENT INC is rather low; currently it is at 23.47%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.59% is significantly below that of the industry average.
  • In its most recent trading session, RLJE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • RLJ ENTERTAINMENT INC has improved earnings per share by 44.0% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, RLJ ENTERTAINMENT INC reported poor results of -$2.30 versus -$0.49 in the prior year.
  • RLJE, with its decline in revenue, underperformed when compared the industry average of 14.9%. Since the same quarter one year prior, revenues slightly dropped by 4.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

You can view the full analysis from the report here: RLJ Entertainment Ratings Report

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At the close, VirtualScopics ( VSCP) was down $0.12 (3.0%) to $3.87 on heavy volume. Throughout the day, 24,699 shares of VirtualScopics exchanged hands as compared to its average daily volume of 4,100 shares. The stock ranged in price between $3.73-$3.98 after having opened the day at $3.95 as compared to the previous trading day's close of $3.99.

VirtualScopics, Inc. provides imaging solutions for the pharmaceutical, biotechnology, and medical device industries. VirtualScopics has a market cap of $11.9 million and is part of the diversified services industry. Shares are up 15.3% year-to-date as of the close of trading on Thursday. Currently there is 1 analyst who rates VirtualScopics a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates VirtualScopics as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on VSCP go as follows:

  • The gross profit margin for VIRTUALSCOPICS INC is currently lower than what is desirable, coming in at 32.24%. Regardless of VSCP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, VSCP's net profit margin of -27.44% significantly underperformed when compared to the industry average.
  • VSCP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 35.33%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Life Sciences Tools & Services industry and the overall market, VIRTUALSCOPICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • VSCP, with its decline in revenue, underperformed when compared the industry average of 20.0%. Since the same quarter one year prior, revenues slightly dropped by 7.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Life Sciences Tools & Services industry average. The net income increased by 42.0% when compared to the same quarter one year prior, rising from -$1.11 million to -$0.65 million.

You can view the full analysis from the report here: VirtualScopics Ratings Report

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Peerless Systems ( PRLS) was another company that pushed the Services sector lower today. Peerless Systems was down $0.09 (2.6%) to $3.41 on heavy volume. Throughout the day, 6,750 shares of Peerless Systems exchanged hands as compared to its average daily volume of 3,800 shares. The stock ranged in price between $3.40-$3.54 after having opened the day at $3.54 as compared to the previous trading day's close of $3.50.

Peerless Systems Corporation develops and licenses software-based digital imaging and networking systems and supporting electronic technologies to original equipment manufacturers (OEMs) of digital document products located primarily in the United States and Japan. Peerless Systems has a market cap of $9.6 million and is part of the diversified services industry. Shares are down 3.8% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Peerless Systems as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

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Highlights from TheStreet Ratings analysis on PRLS go as follows:

  • PRLS's very impressive revenue growth greatly exceeded the industry average of 6.6%. Since the same quarter one year prior, revenues leaped by 90.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • PRLS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 36.47, which clearly demonstrates the ability to cover short-term cash needs.
  • PEERLESS SYSTEMS CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, PEERLESS SYSTEMS CORP increased its bottom line by earning $0.54 versus $0.40 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 118.6% when compared to the same quarter one year ago, falling from $1.40 million to -$0.26 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, PEERLESS SYSTEMS CORP's return on equity significantly trails that of both the industry average and the S&P 500.

You can view the full analysis from the report here: Peerless Systems Ratings Report

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