NEW YORK (TheStreet) -- Shares of Elizabeth Arden Inc. (RDEN - Get Report) are up 8.12% to $30.75 in pre-market trade after South Korea's LG Household & Healthcare Ltd. said it's considering a bid for the U.S. cosmetics firm, Reuters reports.
Elizabeth Arden, which has a market value of $845 million, has seen its sales hit by a much weaker-than-expected North American retail market as well as deep industry discounting in key European markets that have eroded profit margins, Reuters noted.
The shares are down about 20% this year.
TheStreet Ratings team rates ELIZABETH ARDEN INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ELIZABETH ARDEN INC (RDEN) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $145.89 million or 11.90% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -22.91%.
- 48.32% is the gross profit margin for ELIZABETH ARDEN INC which we consider to be strong. Regardless of RDEN'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 8.35% trails the industry average.
- RDEN, with its decline in revenue, slightly underperformed the industry average of 9.8%. Since the same quarter one year prior, revenues fell by 10.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. In comparison to the other companies in the Personal Products industry and the overall market, ELIZABETH ARDEN INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Looking at the price performance of RDEN's shares over the past 12 months, there is not much good news to report: the stock is down 31.17%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, RDEN is still more expensive than most of the other companies in its industry.
- You can view the full analysis from the report here: RDEN Ratings Report