NEW YORK (TheStreet) -- Shares of Vitacost.com, Inc. (VITC) are surging in pre-market trade, up 20.38% to $7.56, after The Kroger Co. (KR - Get Report) said it plans to buy the online seller of vitamins and other health-related products for $280 million in a deal that would give the largest U.S. supermarket chain a stronger presence in Internet retailing, the Wall Street Journal reports.
The purchase is expected to be announced today.
Shares of Kroger are up 0.34% to $49.70 in pre-market trade.
TheStreet Ratings team rates VITACOST.COM INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate VITACOST.COM INC (VITC) a SELL. This is driven by multiple 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 unimpressive growth in net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself."
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 Internet & Catalog Retail industry. The net income has significantly decreased by 30.4% when compared to the same quarter one year ago, falling from -$3.00 million to -$3.91 million.
- 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. Compared to other companies in the Internet & Catalog Retail industry and the overall market, VITACOST.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for VITACOST.COM INC is rather low; currently it is at 22.05%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.73% trails that of the industry average.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, VITC has underperformed the S&P 500 Index, declining 23.58% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- VITACOST.COM INC's earnings per share declined by 22.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VITACOST.COM INC continued to lose money by earning -$0.41 versus -$0.58 in the prior year. This year, the market expects an improvement in earnings (-$0.25 versus -$0.41).
- You can view the full analysis from the report here: VITC Ratings Report