NEW YORK (TheStreet) -- Shares of GNC Holdings Inc. (GNC - Get Report) are down by -1.57% to $35.04 in pre-market trading on Thursday following a ratings downgrade to "hold" from "buy" at Jefferies Group (JEF).
The firm said it reduced its rating on the health and wellness products retailer due to the company's near term earnings risks and weaker sales trends.
Jefferies cut its price target on GNC stock to $39 from $50.
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Separately, TheStreet Ratings team rates GNC HOLDINGS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation: "We rate GNC HOLDINGS INC (GNC) 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 revenue growth, notable return on equity, good cash flow from operations, growth in earnings per share and expanding profit margins. 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:
- GNC's revenue growth has slightly outpaced the industry average of 0.9%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Specialty Retail industry and the overall market, GNC HOLDINGS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $123.13 million or 28.89% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -3.46%.
- GNC HOLDINGS INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, GNC HOLDINGS INC increased its bottom line by earning $2.72 versus $2.29 in the prior year. This year, the market expects an improvement in earnings ($3.07 versus $2.72).
- 39.78% is the gross profit margin for GNC HOLDINGS INC which we consider to be strong. Regardless of GNC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GNC's net profit margin of 10.32% compares favorably to the industry average.
- You can view the full analysis from the report here: GNC Ratings Report