Rating Change #5
Tiffany & Co (TIF) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, notable return on equity, 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 shows weak operating cash flow.
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Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.5%. Since the same quarter one year prior, revenues slightly increased by 1.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- TIFFANY & CO's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TIFFANY & CO increased its bottom line by earning $3.41 versus $2.87 in the prior year. This year, the market expects an improvement in earnings ($3.60 versus $3.41).
- 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. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, TIFFANY & CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for TIFFANY & CO is rather high; currently it is at 60.80%. Regardless of TIF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TIF's net profit margin of 10.40% compares favorably to the industry average.
- Despite currently having a low debt-to-equity ratio of 0.39, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.07 is sturdy.
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