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Sothebys Stock Upgraded (BID)

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) -- Sothebys (NYSE:BID) 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, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 11.8%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, BID has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has slightly increased to $372.20 million or 8.16% when compared to the same quarter last year. In addition, SOTHEBY'S has also vastly surpassed the industry average cash flow growth rate of -72.65%.
  • The gross profit margin for SOTHEBY'S is rather high; currently it is at 60.50%. Regardless of BID's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BID's net profit margin of 22.70% significantly outperformed against the industry.
  • SOTHEBY'S's earnings per share declined by 7.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, SOTHEBY'S reported lower earnings of $1.56 versus $2.44 in the prior year. This year, the market expects an improvement in earnings ($2.24 versus $1.56).
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Sotheby's operates as an auctioneer of authenticated fine art, decorative art, and jewelry. The company operates in three segments: Auction, Finance, and Dealer. The company has a P/E ratio of 23.8, above the S&P 500 P/E ratio of 17.7. Sothebys has a market cap of $2.55 billion and is part of the services sector and specialty retail industry. Shares are up 10.9% year to date as of the close of trading on Tuesday.

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

-- Written by a member of TheStreet Ratings Staff

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.

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