Dreamworks Animation SKG (DWA) Weak On High Volume

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.

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 $17.7 million.
  • DWA has traded 83,872 shares today.
  • DWA is trading at 2.55 times the normal volume for the stock at this time of day.
  • DWA is trading at a new low 4.07% 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. engages in the development, production, and exploitation of animated films and their associated characters worldwide. The company operates in four segments: Feature Films, Television Series and Specials, Consumer Products, and New Media. Currently there are 2 analysts that rate Dreamworks Animation SKG a buy, 4 analysts rate it a sell, and 3 rate it a hold.

The average volume for Dreamworks Animation SKG has been 788,600 shares per day over the past 30 days. Dreamworks Animation SKG has a market cap of $2.1 billion and is part of the services sector and media industry. The stock has a beta of 0.55 and a short float of 32.3% with 19.40 days to cover. Shares are up 19.4% year-to-date as of the close of trading on Thursday.

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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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity 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 7.2%. Since the same quarter one year prior, revenues rose by 14.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Media industry. The net income has significantly decreased by 1631.2% when compared to the same quarter one year ago, falling from $17.19 million to -$263.22 million.
  • 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, DREAMWORKS ANIMATION INC's return on equity significantly trails that of both the industry average and the S&P 500.

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