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Sothebys Stock Downgraded (BID)

NEW YORK ( TheStreet) -- Sothebys (NYSE: BID) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its 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:

  • Despite currently having a low debt-to-equity ratio of 0.52, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.55 is very high and demonstrates very strong liquidity.
  • 37.00% is the gross profit margin for SOTHEBY'S which we consider to be strong. 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 -10.20% significantly underperformed when compared 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 Diversified Consumer Services industry. The net income has significantly decreased by 540.5% when compared to the same quarter one year ago, falling from $2.42 million to -$10.66 million.
  • The share price of SOTHEBY'S has not done very well: it is down 23.85% 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. 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.
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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 14.6, above the average specialty retail industry P/E ratio of 13.5 and below the S&P 500 P/E ratio of 17.7. Sothebys has a market cap of $2.25 billion and is part of the services sector and specialty retail industry. Shares are up 11.8% 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.
-- Written by a member of TheStreet Ratings Staff

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