Goodbye, Ruby Tuesday (RT): Short It on a Close Below $5.10

Ruby Tuesday's (RT) stock charts do not look appetizing and the stock could become less than semiprecious if the decline continues.
By Bruce Kamich ,

NEW YORK (TheStreet) --Ruby Tuesday (RT) does not look appetizing and could become less than semiprecious if the decline continues.

This first chart of RT, above, is not encouraging. RT was in a sideways trading range for around 10 months, between $6 on the downside and $7.50 or so on the upside. The support around $6 continued to hold until early October. Prices broke hard to the downside with trading volume surging. The On-Balance-Volume line moved sharply lower, telling us that liquidation of shares of RT was the special of the day. The slope of the 200-day moving average is negative, following the trend. We see no bullish divergences between the price action and the momentum study.

This long-term chart of RT, above, shows how important the $6 and $5 levels are for the stock. There is no chart support below here until the 2009 lows. Aggressive traders who feel comfortable shorting a low-priced name could sell RT on a close below $5.10. Novices need not apply.

TheStreet Ratings team rates RUBY TUESDAY INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

We rate RUBY TUESDAY INC (RT) 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 largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RUBY TUESDAY 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RUBY TUESDAY INC continued to lose money by earning -$0.05 versus -$1.07 in the prior year. This year, the market expects an improvement in earnings ($0.09 versus -$0.05).
  • The current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that RT's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.
  • RT, with its decline in revenue, slightly underperformed the industry average of 1.2%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for RUBY TUESDAY INC is rather low; currently it is at 16.35%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.50% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$2.47 million or 118.88% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: RT

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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