Rating Change #8
Spectrum Brands Holdings Inc (SPB) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.
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Highlights from the ratings report include:
- SPB's revenue growth has slightly outpaced the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 0.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SPECTRUM BRANDS HOLDINGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SPECTRUM BRANDS HOLDINGS INC turned its bottom line around by earning $0.92 versus -$1.47 in the prior year. This year, the market expects an improvement in earnings ($3.48 versus $0.92).
- 37.30% is the gross profit margin for SPECTRUM BRANDS HOLDINGS INC which we consider to be strong. Regardless of SPB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SPB's net profit margin of 0.66% is significantly lower than the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Household Products industry and the overall market, SPECTRUM BRANDS HOLDINGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Currently the debt-to-equity ratio of 1.69 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, SPB maintains a poor quick ratio of 0.87, which illustrates the inability to avoid short-term cash problems.
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