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) -- Office Depot (NYSE:ODP) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, impressive record of earnings per share growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 359.9% when compared to the same quarter one year prior, rising from -$61.92 million to $160.90 million.
- OFFICE DEPOT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, OFFICE DEPOT INC swung to a loss, reporting -$0.40 versus $0.16 in the prior year. This year, the market expects an improvement in earnings ($0.00 versus -$0.40).
- ODP, with its decline in revenue, underperformed when compared the industry average of 19.5%. Since the same quarter one year prior, revenues slightly dropped by 2.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for OFFICE DEPOT INC is currently lower than what is desirable, coming in at 26.01%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.14% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$25.56 million or 111.83% 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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