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TheStreet Open House

Why RadioShack (RSH) Stock Continues To Rise On Friday

NEW YORK (TheStreet) -- Shares of RadioShack Corp. (RSH) climbed 10.69% to $1.61 on Friday continuing a gain the stock started Thursday after Bloomberg reported a trader spent over $600,000 "buying bullish options" of the consumer electronics retailer.

The unnamed trader bought 20,000 calls, which will expire in October, with a strike price of $1.50.

RadioShack has been struggling due to slow sales and a lender problem that has halted the company's attempts to close its underperforming stores.

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"Somebody's taking a big bullish bet on the stock. This trade helped push the stock higher," said Alex Panagiotidis, the managing director for equity derivatives at Sterne Agee & Leach Inc., to Bloomberg.

Separately, TheStreet Ratings team rates RADIOSHACK CORP as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate RADIOSHACK CORP (RSH) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 202.4% when compared to the same quarter one year ago, falling from -$63.30 million to -$191.40 million.
  • The debt-to-equity ratio is very high at 2.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, RSH maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, RADIOSHACK CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for RADIOSHACK CORP is currently lower than what is desirable, coming in at 29.88%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -20.46% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$139.80 million or 85.41% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: RSH Ratings Report
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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.

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