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One Factor Driving Signet Jewelers (SIG) Up Today

NEW YORK (TheStreet) -- Signet Jewelers  (SIG) was rising 5.94% to $78.89 on Monday on the heels of Corvex Management's announcement it increased its stake in the company to 7.8%.

The hedge fund said Friday via a regulatory filing that it believed Signet was undervalued. Corvex revealed that its conversations with Signet's board this month were constructive and the hedge fund may engage in further conversations with the board.

Signet issued a statement on Friday with regard to the company's conversations with Corvex:

"Signet regularly engages in dialogue with its shareholders to understand their perspective and views on our collective goal of enhancing long-term shareholder value. Over the course of the first month of 2014, we have had such meetings with many of our shareholders, including a constructive meeting with Corvex Management where Corvex shared its views regarding the Company's balance sheet and capital structure.

Management and the Board of Directors, along with our advisors, regularly review our balance sheet and capital structure and we are open to ideas that may contribute to our efforts to prudently enhance long-term shareholder value. Value-optimizing strategies related to our receivables portfolio and our corporate structure are among the items we have been evaluating and will continue to evaluate as part of this ongoing work."

TheStreet Ratings team rates SIGNET JEWELERS LTD as a "buy" with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SIGNET JEWELERS LTD (SIG) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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 solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SIG's revenue growth has slightly outpaced the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 7.7%. 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.
  • SIG's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SIG has a quick ratio of 1.52, which demonstrates the ability of the company to cover short-term liquidity needs.
  • SIGNET JEWELERS LTD' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, SIGNET JEWELERS LTD increased its bottom line by earning $4.36 versus $3.72 in the prior year. This year, the market expects an improvement in earnings ($4.53 versus $4.36).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • 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. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, SIGNET JEWELERS LTD has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • You can view the full analysis from the report here: SIG Ratings Report

Stock quotes in this article: SIG 

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