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The key to investing in individual stocks is choosing wisely. In order to choose wisely, you must do perform due diligence and thoroughly research a company’s balance sheet and prospects for the future.

Earlier this month, we selected DreamWorks Animation (DWA) as a Feature Stock Pick in the Wall St. Cheat Sheet Premium Monthly Newsletter. Dreamworks Animation develops and produces animated feature films such as Shrek, Madagascar, Kung Fu Panda and soon-to-be-released Megamind.

Since we hand-selected shares of DreamWorks in our October issue, shares are up over 8%. Here’s the quarterly breakdown for the Glendale, CA entertainment company:

Earnings: Doubled to $39.8 million, or $0.47 per share, from a gain of $19.6 million, or $.23 per share, YOY.

Revenue: Increased 39% to $188.9 million.

Actual Versus Wall Street Expectations: DreamWorks easily surpassed analysts’ expected profit of $0.35 per share. Revenues crushed the $163.12 million expected.

Notable Stats This Quarter:

  • Shrek Forever After delivered $120.4 million of revenue.
  • How to Train Your Dragon delivered $0.8 million of revenue.
  • Monsters vs. Aliens delivered $11.0 million of revenue.
  • Madagascar: Escape 2 Africa delivered $2.6 million.
  • Kung Fu Panda delivered $9.8 million of revenue.

Did You Hear That?

DreamWorks Animation CEO Jeffrey Katzenberg said:

2010 has already been a historic year for the Company and we are still looking forward to the theatrical release of Megamind on November 5th as well as home entertainment results from both How to Train Your Dragon and Shrek Forever After yet to come this year.

Commentary: Shares of DreamWorks Animation are trading right below their 200 DMA and well-above their 50 DMA. As the chart below indicates, the stock is rising modestly since June and popping on yesterday’s strong quarterly earnings report. (See official company earnings release here.)

(Click to enlarge)

Disclosure: Author long DWA

Source: Earnings Cheat Sheet: DreamWorks Shines Green on Shrek Sales