I never expected shares of DreamWorks Animation (NYSE:DWA) to get this cheap. The stock hit a new all-time low last week of $20.05. That's well off its all-time peak of $42.60, much less its $28 IPO price tag two years ago. That's what happens in the streaky computer animation business when you're running dry on hits. Wallace & Gromit: The Curse of the Were-Rabbit was a box-office disappointment last year, and this year's springtime release of Over the Hedge also failed to live up to initial expectations.

Perfect. That's just the kind of dreary backdrop that Wall Street likes to render, just before a supposedly dead company snaps to life and speeds past bewildered analysts.

For DreamWorks Animation, that moment came on Thursday, when it posted better-than-expected second-quarter results. The company reversed a year-ago loss by earning $0.13 a share, with revenue more than doubling to $74.9 million. Wall Street played the part of Wile E. Coyote, with its Acme targets of $0.02 per share in profitability on $50.8 million.

What did the pros miss? The power of the library, of course. There's a reason why Disney (NYSE:DIS) was more than happy to acquire Pixar in a $7.4 billion deal earlier this year. As a company that has milked its stars for decades, Disney knew that Pixar's creations would be valuable for generations to come. Madagascar may seem like old news, but it contributed roughly half of the quarter's revenue, even though the film hit multiplex screens and DVD retailer shelves last year. Yes, the libraries matter, and in the case of DreamWorks Animation, we can't let a pair of lackluster performers dilute the value of the vault. And let's clarify that "lackluster" performance is relative in the case of Over the Hedge. $153 million in domestic ticket sales isn't shabby; it just failed to lap previous DreamWorks blockbusters like Shrek, Shrek 2, Shark Tale, and Madagascar.

Film Domestic Box Office Gross
Shrek 2 $441.2 million
Shrek $267.7 million
Madagascar $193.6 million
Shark Tale $160.9 million
Over the Hedge $153.4 million
*Source: Box Office Mojo

So let's not write off Over the Hedge as a dud. A bright spot in last week's Activision (NASDAQ:ATVI) quarterly report was its sale of 2 million copies of the Over the Hedge video game. Investors should feel pretty good about that leading up to the film's DVD release date in October, and the company's next theatrical release -- Flushed Away -- come November.

Naturally, the current quarter may be a sleepy one as we wait for those two events to give DreamWorks Animation another kick. The vault should still serve investors well to some extent, but these next few months may be the perfect time to dig into some due diligence and see whether you're ready to snap up shares. After all, DreamWorks is a proven animation studio, trading at a price well below what prized brokerage customers were willing to pay two years and several hits ago.

DreamWorks Animation, Activision, and Disney are all Motley Fool Stock Advisor newsletter recommendations.

Longtime Fool contributor Rick Munarriz loves the art of animated filmmaking. He owns shares of Disney. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.