NEW YORK (TheStreet) -- Blue Nile (Nasdaq:NILE) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its notable return on equity and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market, BLUE NILE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- NILE's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.
- BLUE NILE INC's earnings per share declined by 26.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, BLUE NILE INC reported lower earnings of $0.78 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($1.06 versus $0.78).
- NILE, with its decline in revenue, underperformed when compared the industry average of 23.6%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.04%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 26.82% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
-- Written by a member of TheStreet RatingsStaff
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