NEW YORK (TheStreet) -- Shares of Lululemon Athletica Inc. (LULU - Get Report) are up 1.40% to $43.58 in pre-market trading today following a ratings upgrade to "neutral" from "underperform" at Sterne Agee.
The firm said it changed its rating on the athletic apparel retailer based on a valuation call and the recent pullback in shares.
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Separately, TheStreet Ratings team rates LULULEMON ATHLETICA INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate LULULEMON ATHLETICA INC (LULU) 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 revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 16.8%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- LULU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 6.26, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has slightly increased to $183.53 million or 9.98% when compared to the same quarter last year. Despite an increase in cash flow of 9.98%, LULULEMON ATHLETICA INC is still growing at a significantly lower rate than the industry average of 62.40%.
- 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. When compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, LULULEMON ATHLETICA INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- LULU's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 43.61%, which is also worse than the performance of the S&P 500 Index. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full analysis from the report here: LULU Ratings Report