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TheStreet Open House

Why Cherokee (CHKE) Stock Is Higher Today

NEW YORK (TheStreet) -- Shares of Cherokee Inc.  (CHKE) are surging, up 14.56% to $15.89, on Tuesday.

The apparel company reported financial results for the first quarter ended May 3, of 43 cents per diluted share versus earnings of 27 cents per diluted share, in the same period a year ago.  

Analysts surveyed by Thompson Reuters had expected 25 cents per share.

Must Read: Warren Buffett's 25 Favorite Stocks

 
Revenue rose 23.7% to $10 million, compared with $8.1 million, a year ago.

Cherokee cites its continuing organic growth of the Cherokee brand and the recent Tony Hawk brands acquisition.

Separately, TheStreet Ratings team rates CHEROKEE INC/DE as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHEROKEE INC/DE (CHKE) 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, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and feeble growth in the company's earnings per share."

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 14.7%. Since the same quarter one year prior, revenues slightly increased by 6.2%. 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.
  • 37.39% is the gross profit margin for CHEROKEE INC/DE which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.90% is above that of the industry average.
  • Currently the debt-to-equity ratio of 1.80 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, CHKE's quick ratio is somewhat strong at 1.02, demonstrating the ability to handle short-term liquidity needs.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Textiles, Apparel & Luxury Goods industry. The net income has decreased by 11.7% when compared to the same quarter one year ago, dropping from $1.08 million to $0.95 million.
  • You can view the full analysis from the report here: CHKE Ratings Report
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