NEW YORK (TheStreet) -- Ann (ANN - Get Report) was gaining 5.8% to $39.70 in pre-market trading Monday after activist investors Engine Capital and Red Alder sent a letter to the retailer's board of directors.
The letter urged the company to sell itself, saying it would be worth $50 to $55 a share to a private equity firm or a "strategic buyer," according to Reuters. The investors' letter values the company at $2.29 billion to $2.52 billion.
If Ann does not sell itself, the investors said each member of the company's board should buy back stock equal to about twice their annual compensation as a "sign of confidence."
TheStreet Ratings team rates ANN INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate ANN INC (ANN) a BUY. This is driven by a number of strengths, 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, reasonable valuation levels, expanding profit margins and increase in stock price during the past year. 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:
- ANN's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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 gross profit margin for ANN INC is rather high; currently it is at 58.21%. Regardless of ANN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.87% trails the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- ANN 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ANN INC increased its bottom line by earning $2.19 versus $2.10 in the prior year. For the next year, the market is expecting a contraction of 4.3% in earnings ($2.10 versus $2.19).
- You can view the full analysis from the report here: ANN Ratings Report
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