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

  • FRAN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $55.9 million.
  • FRAN has traded 19.8 million shares today.
  • FRAN is up 3.1% today.
  • FRAN was down 25.9% yesterday.

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More details on FRAN:

Francesca's Holdings Corporation, through its subsidiary, Francesca's Collections, Inc., operates a chain of retail boutiques. The company offers a selection of fashion apparel, jewelry, accessories, and gifts primarily to its female customers. FRAN has a PE ratio of 22.1. Currently there are 10 analysts that rate Francescas Holdings a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Francescas Holdings has been 1.1 million shares per day over the past 30 days. Francescas has a market cap of $1.1 billion and is part of the services sector and retail industry. The stock has a beta of 2.36 and a short float of 33.9% with 3.73 days to cover. Shares are down 7% year to date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Francescas Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:

  • FRAN's revenue growth has slightly outpaced the industry average of 22.6%. Since the same quarter one year prior, revenues rose by 28.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • FRAN 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. To add to this, FRAN has a quick ratio of 1.83, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 25.1% when compared to the same quarter one year prior, rising from $8.74 million to $10.94 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, FRANCESCAS HOLDINGS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • FRAN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 32.75%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, FRAN is still more expensive than most of the other companies in its industry.

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