Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model
NEW YORK (
-- Best Buy
) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally high debt management risk.
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Highlights from the ratings report include:
- 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 106.5% when compared to the same quarter one year ago, falling from $154.00 million to -$10.00 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, BEST BUY CO INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for BEST BUY CO INC is currently lower than what is desirable, coming in at 26.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.10% trails that of the industry average.
- Net operating cash flow has significantly decreased to $101.00 million or 90.73% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite currently having a low debt-to-equity ratio of 0.49, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.23 is very low and demonstrates very weak liquidity.
Best Buy Co., Inc. operates as a retailer of consumer electronics, computing and mobile phone products, entertainment products, appliances, and related services primarily in the United States, Europe, Canada, and China. The company has a P/E ratio of -4.8, below the S&P 500 P/E ratio of 17.7. Best Buy has a market cap of $4.63 billion and is part of the services sector and retail industry. Shares are down 48.8% year to date as of the close of trading on Wednesday.
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