Rating Change #3
Sotheby's (BID) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins 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:
- Net operating cash flow has increased to $344.09 million or 19.46% when compared to the same quarter last year. In addition, SOTHEBY'S has also vastly surpassed the industry average cash flow growth rate of -56.48%.
- The gross profit margin for SOTHEBY'S is rather high; currently it is at 62.40%. Regardless of BID's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BID's net profit margin of 25.10% significantly outperformed against the industry.
- Despite currently having a low debt-to-equity ratio of 0.51, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that BID's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.60 is high and demonstrates strong liquidity.
- SOTHEBY'S's earnings per share declined by 24.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SOTHEBY'S increased its bottom line by earning $2.44 versus $2.32 in the prior year. This year, the market expects an improvement in earnings ($2.46 versus $2.44).
- BID, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues fell by 10.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
Sotheby's, together with its subsidiaries, operates as an auctioneer of authenticated fine and decorative art, jewelry, and collectibles in the United States, the United Kingdom, China, France, and internationally. The company operates in three segments: Auction, Finance, and Dealer. The company has a P/E ratio of 16, above the average specialty retail industry P/E ratio of 12.2 and below the S&P 500 P/E ratio of 17.7. Sothebys has a market cap of $2.3 billion and is part of the services sector and specialty retail industry. Shares are up 39.4% year to date as of the close of trading on Tuesday.You can view the full Sothebys Ratings Report or get investment ideas from our investment research center.
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