Dreamworks Animation SKG (DWA) Weak On High Volume Today

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.

Trade-Ideas LLC identified Dreamworks Animation SKG ( DWA) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Dreamworks Animation SKG as such a stock due to the following factors:

  • DWA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $29.3 million.
  • DWA has traded 222,675 shares today.
  • DWA is trading at 2.12 times the normal volume for the stock at this time of day.
  • DWA is trading at a new low 7.05% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on DWA:

DreamWorks Animation SKG, Inc. is engaged in the development, production, and exploitation of animated films and their associated characters worldwide. The company operates through four segments: Feature Films, Television, Consumer Products, and Others. Currently there is 1 analyst that rates Dreamworks Animation SKG a buy, 2 analysts rate it a sell, and 6 rate it a hold.

The average volume for Dreamworks Animation SKG has been 1.9 million shares per day over the past 30 days. Dreamworks Animation SKG has a market cap of $1.8 billion and is part of the services sector and media industry. The stock has a beta of 0.24 and a short float of 22.1% with 6.83 days to cover. Shares are down 33.7% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Dreamworks Animation SKG as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • DWA's revenue growth has slightly outpaced the industry average of 9.0%. Since the same quarter one year prior, revenues rose by 17.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Media industry average. The net income increased by 18.5% when compared to the same quarter one year prior, going from $10.06 million to $11.93 million.
  • DWA'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 30.42%, 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.
  • Net operating cash flow has significantly decreased to -$74.21 million or 246.24% 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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