Rating Change #9
Staples Inc (SPLS) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the ratings report include:
- STAPLES INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, STAPLES INC increased its bottom line by earning $1.41 versus $1.22 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus $1.41).
- Although SPLS's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
- The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 28.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.10% trails that of the industry average.
- Net operating cash flow has decreased to $146.86 million or 30.15% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
Staples, Inc., together with its subsidiaries, operates as an office products company. The company offers various office supplies and services, office machines and related products, computers and related products, and office furniture under Staples, Quill, and other proprietary brands. The company has a P/E ratio of 10.5, equal to the average specialty retail industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Staples has a market cap of $10.26 billion and is part of the services sector and specialty retail industry. Shares are up 0.1% year to date as of the close of trading on Thursday.You can view the full Staples Ratings Report or get investment ideas from our investment research center.