3 Stocks Pushing The Services Sector Lower

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.

The Services sector as a whole closed the day up 0.3% versus the S&P 500, which was down 0.3%. Laggards within the Services sector included Gray Television ( GTN.A), down 2.5%, Taitron Components ( TAIT), down 4.5%, Watsco ( WSO.B), down 1.6%, RLJ Entertainment ( RLJE), down 13.5% and Nevada Gold & Casinos ( UWN), down 1.7%.

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

Alliance Data Systems ( ADS) is one of the companies that pushed the Services sector lower today. Alliance Data Systems was down $5.52 (2.1%) to $256.45 on average volume. Throughout the day, 623,771 shares of Alliance Data Systems exchanged hands as compared to its average daily volume of 498,700 shares. The stock ranged in price between $255.70-$261.81 after having opened the day at $261.02 as compared to the previous trading day's close of $261.97.

Alliance Data Systems Corporation provides marketing and loyalty solutions in the United States, Canada, and other countries. Alliance Data Systems has a market cap of $14.5 billion and is part of the diversified services industry. Shares are down 0.4% year-to-date as of the close of trading on Friday. Currently there are 12 analysts who rate Alliance Data Systems a buy, no analysts rate it a sell, and 5 rate it a hold.

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TheStreet Ratings rates Alliance Data Systems as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from TheStreet Ratings analysis on ADS go as follows:

  • The revenue growth greatly exceeded the industry average of 12.2%. Since the same quarter one year prior, revenues rose by 23.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ALLIANCE DATA SYSTEMS CORP has improved earnings per share by 28.1% 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. During the past fiscal year, ALLIANCE DATA SYSTEMS CORP increased its bottom line by earning $7.43 versus $6.60 in the prior year. This year, the market expects an improvement in earnings ($12.40 versus $7.43).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the IT Services industry average. The net income increased by 18.0% when compared to the same quarter one year prior, going from $116.44 million to $137.44 million.
  • Net operating cash flow has slightly increased to $254.69 million or 1.28% when compared to the same quarter last year. In addition, ALLIANCE DATA SYSTEMS CORP has also modestly surpassed the industry average cash flow growth rate of -2.67%.
  • Powered by its strong earnings growth of 28.07% and other important driving factors, this stock has surged by 31.62% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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

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At the close, Nevada Gold & Casinos ( UWN) was down $0.02 (1.7%) to $1.16 on light volume. Throughout the day, 3,100 shares of Nevada Gold & Casinos exchanged hands as compared to its average daily volume of 20,400 shares. The stock ranged in price between $1.15-$1.18 after having opened the day at $1.15 as compared to the previous trading day's close of $1.18.

Nevada Gold & Casinos, Inc., a gaming company, is engaged in financing, developing, owning, and operating gaming properties and projects primarily in Washington and South Dakota. The company operates in three segments: Washington Gold, South Dakota Gold, and Corporate. Nevada Gold & Casinos has a market cap of $18.8 million and is part of the diversified services industry. Shares are down 13.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Nevada Gold & Casinos as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year.

Highlights from TheStreet Ratings analysis on UWN go as follows:

  • NEVADA GOLD & CASINOS INC has improved earnings per share by 33.3% 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 two years. During the past fiscal year, NEVADA GOLD & CASINOS INC increased its bottom line by earning $0.03 versus $0.00 in the prior year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 42.6% when compared to the same quarter one year prior, rising from $0.45 million to $0.65 million.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.6%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, NEVADA GOLD & CASINOS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • In its most recent trading session, UWN 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.

You can view the full analysis from the report here: Nevada Gold & Casinos 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.

RLJ Entertainment ( RLJE) was another company that pushed the Services sector lower today. RLJ Entertainment was down $0.36 (13.5%) to $2.31 on average volume. Throughout the day, 9,380 shares of RLJ Entertainment exchanged hands as compared to its average daily volume of 6,700 shares. The stock ranged in price between $2.16-$2.67 after having opened the day at $2.67 as compared to the previous trading day's close of $2.67.

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 $35.4 million and is part of the diversified services industry. Shares are down 44.3% year-to-date as of the close of trading on Friday.

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, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

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

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.
  • Net operating cash flow has significantly decreased to $0.17 million or 97.99% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for RLJ ENTERTAINMENT INC is currently lower than what is desirable, coming in at 30.90%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, RLJE's net profit margin of -7.10% significantly underperformed when compared to the industry average.
  • RLJE'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 52.50%, 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.
  • RLJ ENTERTAINMENT INC reported significant earnings per share improvement 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.

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

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