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Trade-Ideas: Aeropostale (ARO) Is Today's "Dead Cat Bounce" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Aeropostale ( ARO) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Aeropostale as such a stock due to the following factors:

  • ARO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $55.0 million.
  • ARO has traded 53,511 shares today.
  • ARO is up 3.3% today.
  • ARO was down 20.2% yesterday.

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More details on ARO:

Aeropostale, Inc., together with its subsidiaries, operates as a mall-based specialty retailer of casual apparel and accessories. Currently there are 4 analysts that rate Aeropostale a buy, 3 analysts rate it a sell, and 11 rate it a hold.

The average volume for Aeropostale has been 2.0 million shares per day over the past 30 days. Aeropostale has a market cap of $861.6 million and is part of the services sector and retail industry. The stock has a beta of 2.05 and a short float of 20.5% with 1.94 days to cover. Shares are down 32.7% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Aeropostale as a hold. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income.

Highlights from the ratings report include:

  • ARO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.84 is somewhat weak and could be cause for future problems.
  • ARO, with its decline in revenue, underperformed when compared the industry average of 14.9%. Since the same quarter one year prior, revenues slightly dropped by 9.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The share price of AEROPOSTALE INC has not done very well: it is down 8.30% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • The gross profit margin for AEROPOSTALE INC is currently lower than what is desirable, coming in at 25.92%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.69% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$64.70 million or 1533.88% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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