NEW YORK (TheStreet) -- Shares of Pep Boys - Manny, Moe & Jack (PBY) - Get Prospect Capital Corporation 6.25 % Notes 2018-15.06.28 Report were gaining 22.7% to $14.91 on Monday following the announcement that car part supplier Bridgestone (BRDCY) will acquire the auto parts retailer for about $835 million.
Bridgestone will buy all outstanding shares of Pep Boys for $15 a share in cash under the terms of the acquisition. The price represents a 23% over Pep Boys' Friday closing price, and a 62% premium over the company's closing price on May 19, before reports that the retailer was looking to sell itself.
The acquisition is expected to close in the beginning of 2016.
"We are excited to join the Bridgestone family of companies to become part of the world's largest company-owned tire and automotive service retail network," Pep Boys CEO Scott Sider said in a statement. "This transaction delivers a significant premium for Pep Boys' shareholders and offers new opportunities for our employees across a bigger business."
About 8.2 million shares of Pep Boys were traded by 9:38 a.m. Monday, well above the company's average trading volume of about 373,000 shares a day.
TheStreet Ratings team rates PEP BOYS-MANNY MOE & JACK as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate PEP BOYS-MANNY MOE & JACK (PBY) 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 solid stock price performance, increase in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins.
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 Specialty Retail industry. The net income increased by 1881.8% when compared to the same quarter one year prior, rising from -$0.27 million to $4.81 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 0.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PEP BOYS-MANNY MOE & JACK has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, PEP BOYS-MANNY MOE & JACK swung to a loss, reporting -$0.50 versus $0.13 in the prior year. This year, the market expects an improvement in earnings ($0.34 versus -$0.50).
- The gross profit margin for PEP BOYS-MANNY MOE & JACK is currently lower than what is desirable, coming in at 27.32%. Regardless of PBY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.91% trails the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Specialty Retail industry and the overall market, PEP BOYS-MANNY MOE & JACK's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: PBY