Bebe Stores Inc. Stock Downgraded (BEBE)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- bebe stores (Nasdaq:BEBE) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

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Highlights from the ratings report include:

• 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 Specialty Retail industry. The net income has significantly decreased by 173.4% when compared to the same quarter one year ago, falling from $6.56 million to -$4.82 million.
• The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Specialty Retail industry and the overall market, BEBE STORES INC's return on equity significantly trails that of both the industry average and the S&P 500.
• Net operating cash flow has significantly decreased to $7.70 million or 72.42% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
• Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 55.50%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 175.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
• BEBE STORES INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, BEBE STORES INC increased its bottom line by earning $0.15 versus $0.05 in the prior year. For the next year, the market is expecting a contraction of 273.3% in earnings (-$0.26 versus $0.15).

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bebe stores, inc. designs, develops, and produces a line of women's apparel and accessories. The company offers a range of fashion separates, tops, dresses, active wear, and outerwear in wear-to-work, weekend, and party lifestyle categories. Bebe has a market cap of $328.1 million and is part of the services sector and retail industry. Shares are down 1% year to date as of the close of trading on Tuesday.

You can view the full bebe Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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• bebe stores Inc. Income Statement