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Cencosud SA Stock Downgraded (CNCO)

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) -- Cencosud (NYSE:CNCO) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and poor profit margins.

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Highlights from the ratings report include:

  • CENCOSUD SA's earnings per share declined by 7.7% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, CENCOSUD SA reported lower earnings of $0.67 versus $0.72 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Food & Staples Retailing industry average. The net income has decreased by 5.1% when compared to the same quarter one year ago, dropping from $197.91 million to $187.83 million.
  • The debt-to-equity ratio of 1.04 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.41, which clearly demonstrates the inability to cover short-term cash needs.
  • 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. In comparison to the other companies in the Food & Staples Retailing industry and the overall market, CENCOSUD SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for CENCOSUD SA is currently lower than what is desirable, coming in at 30.30%. Regardless of CNCO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CNCO's net profit margin of 3.59% compares favorably to the industry average.
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Cencosud S.A., together with its subsidiaries, operates as a multi-brand retailer in Argentina, Brazil, Chile, Peru, and Colombia. The company has a P/E ratio of 24.1, above the S&P 500 P/E ratio of 17.7. Cencosud has a market cap of $14.9 billion and is part of the services sector and specialty retail industry. Shares are down 2.6% year to date as of the close of trading on Wednesday.

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

-- Written by a member of TheStreet Ratings Staff

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