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Why Express (EXPR) Stock Is Surging Today

NEW YORK (TheStreet) -- Express  (EXPR) surged Friday after private equity firm Sycamore Partners announced Thursday it would pursue a takeover of the struggling apparel retailer.

The New York-based firm disclosed in a regulatory filing that it has amassed an almost 10% stake in Express for slightly more than $106 million.

Sycamore has a track record of similar acquisitions. It completed a $2.2 billion purchase of the Jones Group, which owns Nine West and Anne Klein, in April. The firm bought Hot Topic for approximately $530 million in 2013 and purchased Talbots for $390 million in 2012. It also gave $150 million in financing to Aeropostale  (ARO) in March.

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The stock was up 20.66% to $16.35 at 12:37 p.m.

Separately, TheStreet Ratings team rates EXPRESS INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate EXPRESS INC (EXPR) 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 strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow."

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

  • EXPR, with its decline in revenue, slightly underperformed the industry average of 2.0%. Since the same quarter one year prior, revenues slightly dropped by 9.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 33.48%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 84.21% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • EXPRESS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, EXPRESS INC reported lower earnings of $1.38 versus $1.60 in the prior year. For the next year, the market is expecting a contraction of 39.9% in earnings ($0.83 versus $1.38).
  • The gross profit margin for EXPRESS INC is currently lower than what is desirable, coming in at 34.05%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.10% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$31.19 million or 681.73% 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: EXPR 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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