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Coastal Contacts Inc. Stock Upgraded (COA)

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.

NEW YORK (TheStreet) -- Coastal Contacts (Nasdaq:COA) has been upgraded by TheStreet Ratings from sell to hold. 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 and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

  • 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:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 17.7%. Since the same quarter one year prior, revenues rose by 10.4%. 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.
  • COA's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that COA's debt-to-equity ratio is low, the quick ratio, which is currently 0.64, displays a potential problem in covering short-term cash needs.
  • 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 Internet & Catalog Retail industry. The net income has significantly decreased by 42.6% when compared to the same quarter one year ago, falling from -$1.86 million to -$2.65 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 Internet & Catalog Retail industry and the overall market, COASTAL CONTACTS INC's return on equity significantly trails that of both the industry average and the S&P 500.

Coastal Contacts Inc. operates as an online direct-to-consumer retailer of contact lenses, glasses, sunglasses, contact lens solutions, and vision care accessories in North America, Europe, and the Asia Pacific region. Coastal Contacts has a market cap of $192.2 million and is part of the services sector and retail industry. Shares are up 16.3% year to date as of the close of trading on Tuesday.

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

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