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TSC Ratings' Updates: Family Dollar

After analyzing the company's debt-to-equity ratio, we noticed it is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.08 is very weak and demonstrates a lack of ability to pay short-term obligations. The company has improved earnings per share by 15.0% year-over-year in the most recent quarter. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, Family Dollar increased its bottom line, earning $1.62 compared with $1.25 in the prior year. For the next year, the market is expecting earnings to fall to $1.61 a share. Family Dollar had been rated a hold since November 21, 2007.

Apollo Investment (AINV - Get Report), which operates as a principal investment firm specializing in providing mezzanine and senior secured loans to middle market companies, was downgraded to hold. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks.

The company's strengths can be seen in multiple areas, such as its robust 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.

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