NEW YORK (TheStreet) -- Shares of RadioShack (RSH) are tumbling, down 27.14% to 29 cents in late morning trading Thursday, following reports that the struggling electronics retailer will file for bankruptcy protection as soon as the first week of February, according to the Wall Street Journal.
The company is currently in talks with a private-equity firm that could buy its assets out of bankruptcy, but RadioShack cautioned that the deal may not happen, the Journal reports.
Last month, RadioShack reported a larger than expected third quarter loss, after warning in September that a bankruptcy filing was a possibility.
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Due to its failed turnaround efforts, the company has said it is running dangerously low on cash, posting losses in each of its last 11 quarters, noted the Journal.
Fort Worth, TX-based RadioShack is engaged in the retail sale of consumer electronics goods and services through its store chain as well as other outlets.
TheStreet Ratings has rated RadioShack a Sell since 10/24/2012. The most recent ratings report (Click here to get it free) indicated the following:
"We rate RADIOSHACK CORP (RSH) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RADIOSHACK CORP's earnings per share declined by 42.3% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, RADIOSHACK CORP reported poor results of -$3.89 versus -$1.10 in the prior year. For the next year, the market is expecting a contraction of 2.8% in earnings (-$4.00 versus -$3.89).
- 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 43.3% when compared to the same quarter one year ago, falling from -$112.40 million to -$161.10 million.
- Net operating cash flow has significantly decreased to -$117.90 million or 204.70% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The gross profit margin for RADIOSHACK CORP is currently lower than what is desirable, coming in at 34.11%. Regardless of RSH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RSH's net profit margin of -24.77% significantly underperformed when compared to the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 84.42%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 42.34% compared to the year-earlier 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.
- You can view the full analysis from the report here: RSH Ratings Report
When compared to its peers, TheStreet Ratings report contained the following peer comparisons: