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.
NEW YORK ( TheStreet) -- Discovery Communications (Nasdaq: DISCA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including a generally limited upside potential in the stock itself and weak operating cash flow.
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- DISCOVERY COMMUNICATIONS INC has improved earnings per share by 32.9% 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DISCOVERY COMMUNICATIONS INC increased its bottom line by earning $2.97 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($7.30 versus $2.97).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Media industry average. The net income increased by 26.3% when compared to the same quarter one year prior, rising from $300.00 million to $379.00 million.
- The gross profit margin for DISCOVERY COMMUNICATIONS INC is currently very high, coming in at 90.06%. Regardless of DISCA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DISCA's net profit margin of 23.54% significantly outperformed against the industry.
- Net operating cash flow has decreased to $232.00 million or 31.56% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.