Why China Mobile Games (CMGE) Stock Is Down Today

NEW YORK (TheStreet) -- China Mobile Games (CMGE) stock is tumbling after the company reportedly removed nine executives from their positions, including its President Ying Shuling, due to allegations of bribery. The company has yet to confirm or deny reports. 

By late afternoon, shares had dropped 22.6% to $14.63. Trading volume of 2.4 million shares was more than 11 times its three-month daily average. 

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Separately, TheStreet Ratings team rates CHINA MOBILE GAMES -ADR as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHINA MOBILE GAMES -ADR (CMGE) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 solid stock price performance. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."

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

  • CMGE's very impressive revenue growth greatly exceeded the industry average of 7.5%. Since the same quarter one year prior, revenues leaped by 487.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CMGE 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 4.87, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for CHINA MOBILE GAMES -ADR is rather high; currently it is at 62.90%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 16.12% trails the industry average.
  • In comparison to the other companies in the Software industry and the overall market, CHINA MOBILE GAMES -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has significantly decreased to -$3.79 million or 777.99% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
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