NEW YORK (TheStreet) -- Men's Wearhouse (MW - Get Report) and Jos. A. Bank (JOSB - Get Report) were both rising more than 7.5% at 1:09 p.m. on Monday after the former increased its takeover offer for the latter yet again.
Men's Wearhouse increased the bid by 10% to approximately $1.78 billion. The company's offer now stands at $63.50 a share, up from $57.50 a share, for Jos. A. Bank. The deal expires on March 12 and is contingent upon Jos. A. Bank's ending an offer it made to acquire Eddie Bauer. Jos. A. Bank's directors must also redeem or invalidate the shareholder rights' plan that is currently in place. Men's Wearhouse said it could increase the bid to $65 per share if it can look at Jos. A. Bank's books and gets access to the company's management team.
"We rate MENS WEARHOUSE INC (MW) a BUY. This is driven by multiple strengths, 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 solid stock price performance, revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. 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:
- Compared to its closing price of one year ago, MW's share price has jumped by 54.72%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MW should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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.
- MW's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.41 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Net operating cash flow has remained constant at $58.14 million with no significant change when compared to the same quarter last year. In addition, MENS WEARHOUSE INC has modestly surpassed the industry average cash flow growth rate of -5.07%.
- 48.66% is the gross profit margin for MENS WEARHOUSE INC which we consider to be strong. Regardless of MW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.88% trails the industry average.
- You can view the full analysis from the report here: MW Ratings Report