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NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, unimpressive growth in net income and feeble growth in the company's earnings per share.
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Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.0%. Since the same quarter one year prior, revenues slightly increased by 8.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 543.11% to $74.00 million when compared to the same quarter last year. In addition, TEMPUR SEALY INTL INC has also vastly surpassed the industry average cash flow growth rate of 38.08%.
- Compared to its closing price of one year ago, TPX's share price has jumped by 47.90%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The change in net income from the same quarter one year ago has exceeded that of the Household Durables industry average, but is less than that of the S&P 500. The net income has significantly decreased by 37.5% when compared to the same quarter one year ago, falling from -$1.60 million to -$2.20 million.
- The debt-to-equity ratio is very high at 11.39 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, TPX maintains a poor quick ratio of 0.97, which illustrates the inability to avoid short-term cash problems.
Tempur Sealy International, Inc. develops, manufactures, markets, and distributes bedding products in North America and internationally. The company provides mattresses, foundations, adjustable bases, and other products, including pillows and other accessories. Tempur Sealy International has a market cap of $3.33 billion and is part of the consumer goods sector and consumer durables industry. Shares are up 0.6% year to date as of the close of trading on Wednesday.
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