TSC Ratings' Updates: Family Dollar
Computer Sciences (CSC), which provides information technology (IT) and business process outsourcing, and IT and professional services to the commercial and government markets, was upgraded to buy. Our analysis show the company has a debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.92 is somewhat weak and could be cause for future problems. But we feel these strengths outweigh the fact that the company has had sub-par growth in net income.
Since the same quarter one year prior, revenues rose by 10.9% -- slightly outpacing the industry average of 5.4%. The growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. Computer Sciences' earnings per share declined by 20.1% in the most recent quarter compared with the same quarter a year ago. Even though earnings have been volatile recently, we feel it is poised for EPS growth in the coming year. During the past fiscal year, company increased its bottom line to $3.24 from $2.28 in the prior year. This year the market expects the company to earn $4.31, which would result of an increase of about 33%. Computer Sciences had been rated a hold since November 9, 2008.
Empresa Distribuidora (EDN), which operates as an electricity distribution company in Argentina, was initiated with a sell. The rating is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, deteriorating net income and poor profit margins.
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