Why RealD (RLD) Stock Is Gaining Today

NEW YORK (TheStreet) -- RealD (RLD) was gaining 8% to $12.64 Thursday after beating analysts' expectations for earnings and revenue in the fiscal fourth quarter.

RealD posted a loss of -10 cents a share for the fourth quarter, beating the Capital IQ Consensus Estimate of -23 cents a share by 13 cents. Revenue fell -10.6% from the year-ago quarter to $40.64 million, but still beat analysts' estimates of $33.66 million for the quarter.

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TheStreet Ratings team rates REALD INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate REALD INC (RLD) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, REALD INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • RLD has underperformed the S&P 500 Index, declining 21.62% from its price level of one year ago. 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.
  • REALD INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, REALD INC swung to a loss, reporting -$0.20 versus $0.65 in the prior year. For the next year, the market is expecting a contraction of 85.0% in earnings (-$0.37 versus -$0.20).
  • Net operating cash flow has slightly increased to $13.57 million or 9.77% when compared to the same quarter last year. Despite an increase in cash flow of 9.77%, REALD INC is still growing at a significantly lower rate than the industry average of 72.44%.
  • The gross profit margin for REALD INC is currently very high, coming in at 70.22%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.48% trails the industry average.
  • You can view the full analysis from the report here: RLD Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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