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NEW YORK (TheStreet) -- American Apparel (APP) - Get AppLovin Corp. Class A Report shares are up 7.5% to $1.15 in early market trading on Monday after the teen apparel retailer said that it is evaluating an acquisition offer from an unnamed party with a purchase price valued between $1.30 and $1.40 per share.

The company also announced that co-chairman Allan Mayer and David Danziger have stepped down from their positions to be replaced by Colleen B. Brown who joined the board in August. Mayer and Danziger will remain on the company's board .

The struggling retailer's stock jumped 45% last Thursday when the New York Post originally broke the story of the proposed acquisition, its largest single day gain in five years, according to Bloomberg.

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TheStreet Recommends

TheStreet Ratings team rates AMERICAN APPAREL INC as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERICAN APPAREL INC (APP) a SELL. This is based on the combination of unfavorable investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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

  • 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 Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 1167.9% when compared to the same quarter one year ago, falling from -$1.51 million to -$19.18 million.
  • The share price of AMERICAN APPAREL INC has not done very well: it is down 9.10% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has significantly decreased to $2.00 million or 60.58% when compared to the same quarter last year. Despite a decrease in cash flow of 60.58%, AMERICAN APPAREL INC is in line with the industry average cash flow growth rate of -61.75%.
  • AMERICAN APPAREL 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, AMERICAN APPAREL INC reported poor results of -$0.96 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings (-$0.25 versus -$0.96).
  • APP, with its decline in revenue, underperformed when compared the industry average of 16.9%. Since the same quarter one year prior, revenues slightly dropped by 5.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: APP Ratings Report

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