Rating Change #5
Brazilian Distribution Company (CBD) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its increase in net income, growth in earnings per share, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 90.4% when compared to the same quarter one year prior, rising from $61.99 million to $118.05 million.
- CIA BRASILEIRA DE DISTRIB reported significant earnings per share improvement 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, CIA BRASILEIRA DE DISTRIB reported lower earnings of $1.54 versus $1.73 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $1.54).
- The revenue fell significantly faster than the industry average of 14.7%. Since the same quarter one year prior, revenues fell by 28.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- 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. When compared to other companies in the Food & Staples Retailing industry and the overall market, CIA BRASILEIRA DE DISTRIB's return on equity is below that of both the industry average and the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
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