NEW YORK (TheStreet) -- Shares of Destination Maternity Corp. (DEST - Get Report) closed lower by -8.19% to $22.77 on Thursday after the company reported a 5.5% decrease in net sales to $134 million for the 2014 third quarter, compared to $141.9 million for the year ago period.
The company, a maternity apparel retailer, is unable to give an update on its profit and earnings results in order to comply with the U.K. Takeover Code attached to its proposed merger with Mothercare PLC (MHCRF).
Separately, TheStreet Ratings team rates DESTINATION MATERNITY CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate DESTINATION MATERNITY CORP (DEST) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has slightly increased to -$5.91 million or 6.88% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -3.80%.
- The gross profit margin for DESTINATION MATERNITY CORP is rather high; currently it is at 54.36%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 2.57% trails the industry average.
- DEST 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. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.
- DEST, with its decline in revenue, slightly underperformed the industry average of 1.4%. Since the same quarter one year prior, revenues slightly dropped by 6.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: DEST Ratings Report