The firm currently has an "overweight" rating and a $32 price target on the stock.
"Our checks have consistently noted KATE as the least promotional and best merchandised handbag brand compared to peers," analysts stated.
Other positives include margin expansion and earnings power, the firm added.
Based in New York, Kate Spade designs and markets apparel and accessories.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate KATE SPADE & CO as a Hold with a ratings score of C. 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 increase in net income, revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 125.2% when compared to the same quarter one year prior, rising from -$9.13 million to $2.30 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 12.4%. Since the same quarter one year prior, revenues rose by 10.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for KATE SPADE & CO is rather high; currently it is at 61.23%. Regardless of KATE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.83% trails the industry average.
- KATE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 39.85%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The debt-to-equity ratio is very high at 2.32 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, KATE maintains a poor quick ratio of 0.98, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: KATE