TSC Ratings' Updates: American Apparel

Note: Our quantitative model makes stock recommendations based on GAAP figures that may differ materially from data as reported by the companies themselves. As a result, rating changes are occasionally driven by so-called nonrecurring items. As always, we urge readers to use TSC Ratings' reports in conjunction with additional information to construct their opinions on the value that should be placed on any given stock.

The following ratings changes were generated on Tuesday, March 24.

We've initiated coverage on apparel retailer American Apparel(APP Quote) at sell, driven by the company's debt management.

American Apparel's 0.8 debt-to-equity ratio is somewhat low overall but higher than the industry average. Its quick ratio of 0.4 is low, suggesting possibly weak liquidity. Earnings per share declined by 16.7% in the most recent quarter compared with the same quarter last year, but we feel the company is poised for EPS growth in the coming year. Its 59.9% gross margin has increased from the year-ago period; its 2.7% net profit margin trails the industry average. Net operating cash flow improved to $20.31 million, compared with no operating cash flow in the year-ago quarter. ...