NEW YORK (TheStreet) -- Shares of Sotheby's (BID) are down 1,87% to $43.00 after the New York Times reported this afternoon that activist investor Daniel S. Loeb called on shareholders to overthrow the auction house's "lackadaisical" board.
In a letter to shareholders, Loeb's hedge fund, Third Point, appealed to shareholders to vote for its proposal for the company.
Loeb accused Sotheby's board of lacking any "skin in the game," and that a "dysfunctional corporate culture" had resulted in a company that is poorly managed and focused on short-term goals.
TheStreet Ratings team rates SOTHEBY'S as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:"We rate SOTHEBY'S (BID) a BUY. This is driven by a number of 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 revenue growth, increase in stock price during the past year, impressive record of earnings per share growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow." Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 16.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- SOTHEBY'S has improved earnings per share by 35.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, SOTHEBY'S increased its bottom line by earning $1.86 versus $1.56 in the prior year. This year, the market expects an improvement in earnings ($2.30 versus $1.86).
- The gross profit margin for SOTHEBY'S is rather high; currently it is at 60.40%. Regardless of BID's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BID's net profit margin of 26.75% significantly outperformed against the industry.
- Despite currently having a low debt-to-equity ratio of 0.46, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that BID's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.53 is high and demonstrates strong liquidity.
- You can view the full analysis from the report here: BID Ratings Report
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