Why Global Eagle Entertainment (ENT) Stock Is Gaining Today

NEW YORK (TheStreet) -- Global Eagle Entertainment (ENT) was gaining 9.3% to $12.00 Tuesday after announcing a new technical services agreement with Boeing (BA).

As part of the agreement the two companies will evaluate Global Eagle's satellite-based in-flight wi-fi and connectivity solution for line-fit offerability to airlines worldwide. The agreement is the first step in making Global Eagle's system a pre-installed option on Boeing 737 and 787 planes.

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

"We rate GLOBAL EAGLE ENTERTAINMENT (ENT) a SELL. This is driven by some concerns, 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 and poor profit margins."

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 Internet Software & Services industry and the overall market, GLOBAL EAGLE ENTERTAINMENT's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for GLOBAL EAGLE ENTERTAINMENT is currently lower than what is desirable, coming in at 26.65%. Regardless of ENT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ENT's net profit margin of -30.64% significantly underperformed when compared to the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Internet Software & Services industry. The net income increased by 2.4% when compared to the same quarter one year prior, going from -$26.98 million to -$26.34 million.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • GLOBAL EAGLE ENTERTAINMENT has improved earnings per share by 39.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, GLOBAL EAGLE ENTERTAINMENT continued to lose money by earning -$2.14 versus -$2.24 in the prior year. This year, the market expects an improvement in earnings (-$0.51 versus -$2.14).
  • You can view the full analysis from the report here: ENT Ratings Report

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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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