NEW YORK (TheStreet) -- Shares of Staples (SPLS) are down 1.62% to $12.11 in morning trading as regulators prepare to reject the company's $6 billion bid for rival Office Depot (ODP), according to the New York Post.
Regulators are hesitant about approving the deal because it would create one office supply giant that would serve corporate and government clients, according to Post sources.
There are concerns about merging the two retailers as combined they hold all of the Fortune 1000's office-supply contracts.
Staples has offered to transfer about $600 million in back end contracts to office supply wholesaler Essendant (ESND) in order to gain regulatory approval.
Federal Trade Commission regulators have until December 8 to decide whether to sue to halt the deal.
TheStreet Ratings team rates STAPLES INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate STAPLES INC (SPLS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SPLS's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.
- STAPLES INC's earnings per share declined by 8.8% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, STAPLES INC reported lower earnings of $0.21 versus $1.09 in the prior year. This year, the market expects an improvement in earnings ($0.92 versus $0.21).
- SPLS, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 6.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 28.91%. Regardless of SPLS'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 3.54% trails the industry average.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income has decreased by 8.7% when compared to the same quarter one year ago, dropping from $216.79 million to $198.00 million.
- You can view the full analysis from the report here: SPLS
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.