NEW YORK (TheStreet) -- Orbitz Worldwide (OWW) shares are rising, up 4.7% to $8.50, in early market trading on Tuesday after analysts at UBS AG (UBS - Get Report) initiated coverage with a "buy" rating and $10 price target.
The firm is impressed with the prospects of the online travel company's hotel bookings business.
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TheStreet Ratings team rates ORBITZ WORLDWIDE INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ORBITZ WORLDWIDE INC (OWW) 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, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow."
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 4.4%. Since the same quarter one year prior, revenues slightly increased by 3.6%. 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.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, ORBITZ WORLDWIDE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The debt-to-equity ratio is very high at 13.63 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, OWW has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Net operating cash flow has decreased to $156.47 million or 11.22% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: OWW Ratings Report