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TheStreet Ratings Top 10 Rating Changes

NEW YORK (TheStreet Ratings) -- Every trading day TheStreet Ratings' stock model reviews the investment ratings on around 4,800 U.S. traded stocks for potential upgrades or downgrades based on the latest available financial results and trading activity.

TheStreet Ratings released rating changes on 91 U.S. common stocks for week ending September 2, 2011. 12 stocks were upgraded and 79 stocks were downgraded by our stock model.

Rating Change #10

Urban Outfitters (URBN) has been downgraded by TheStreet Ratings from buy to 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 7.5%. Since the same quarter one year prior, revenues rose by 10.3%. 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.
  • Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.48 is sturdy.
  • 37.90% is the gross profit margin for URBAN OUTFITTERS INC which we consider to be strong. Regardless of URBN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, URBN's net profit margin of 9.30% compares favorably to the industry average.
  • 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 Specialty Retail industry. The net income has decreased by 20.9% when compared to the same quarter one year ago, dropping from $71.66 million to $56.69 million.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, URBN has underperformed the S&P 500 Index, declining 13.68% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

Urban Outfitters, Inc. operates lifestyle specialty retail stores under the Urban Outfitters, Anthropologie, Free People, Terrain, Leifsdottir, and BHLDN brands. It also engages in wholesale business under the Free People and Leifsdottir brands. The company has a P/E ratio of 17.5, below the average retail industry P/E ratio of 17.7 and below the S&P 500 P/E ratio of 17.7. Urban Outfitters has a market cap of $4.1 billion and is part of the services sector and retail industry. Shares are down 26.9% year to date as of the close of trading on Thursday.

You can view the full Urban Outfitters Ratings Report or get investment ideas from our investment research center.

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