NEW YORK (TheStreet) -- Quiksilver (NYSE:ZQK) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally weak debt management and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- 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 Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 39.0% when compared to the same quarter one year ago, falling from -$16.27 million to -$22.61 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, QUIKSILVER INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $3.88 million or 94.79% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio of 1.29 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, ZQK's quick ratio is somewhat strong at 1.22, demonstrating the ability to handle short-term liquidity needs.
- The share price of QUIKSILVER INC has not done very well: it is down 11.22% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
-- Written by a member of TheStreet Ratings Staff
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