NEW YORK (TheStreet) -- Shares of Office Depot (ODP - Get Report) rose 6.62% to $5.46 on Tuesday after Credit Suisse (CS) commented on a potential merger between the office supply chain and its peer company Staples (SPLS) .
The firm estimated that a merger would increase profitability and would lead to an annualized synergy run rate of $1.44 billion.
Credit Suisse upgraded Staples to "outperform" from "neutral."
Separately, TheStreet Ratings team rates OFFICE DEPOT INC as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate OFFICE DEPOT INC (ODP) 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 robust revenue growth, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ODP's very impressive revenue growth greatly exceeded the industry average of 0.5%. Since the same quarter one year prior, revenues leaped by 58.8%. 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.
- 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. 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.
- Net operating cash flow has significantly decreased to -$88.00 million or 28942.90% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Specialty Retail industry. The net income has significantly decreased by 252.3% when compared to the same quarter one year ago, falling from -$54.21 million to -$191.00 million.
- You can view the full analysis from the report here: ODP Ratings Report
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