Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link
NEW YORK (
-- Big Lots
) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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Highlights from the ratings report include:
- BIG's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.12 is very weak and demonstrates a lack of ability to pay short-term obligations.
- 38.24% is the gross profit margin for BIG LOTS INC which we consider to be strong. Regardless of BIG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BIG's net profit margin of 5.15% compares favorably to the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.2%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- BIG LOTS INC's earnings per share declined by 33.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, BIG LOTS INC reported lower earnings of $2.14 versus $2.98 in the prior year. This year, the market expects an improvement in earnings ($2.40 versus $2.14).
- In its most recent trading session, BIG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
Big Lots, Inc., through its subsidiaries, operates as a broadline closeout retailer in the United States. Big Lots has a market cap of $2.15 billion and is part of the services sector and retail industry. Shares are up 14.6% year to date as of the close of trading on Thursday.
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