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NEW YORK (TheStreet) -- Roundy's  (RNDY) was falling 4.09% to $7.04 on Friday after 8.84 million shares of the supermarket chain were priced at $7 a share.

The Milwaukee-based company is offering about 2.95 million shares, while some shareholders are offering 5.9 million shares. The company announced the public offering on Monday.

Roundy's plans to use the net proceeds from the sale for "general corporate purposes," including the building out of Chicago stores that it acquired from Safeway (SWY) .

Must Read: Roundys, Inc. Announces Proposed Public Offering Of Common Stock

TheStreet Recommends

TheStreet Ratings team rates ROUNDY'S INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate ROUNDY'S INC (RNDY) a SELL. This is driven by several 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 deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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 Food & Staples Retailing industry. The net income has significantly decreased by 52.5% when compared to the same quarter one year ago, falling from $7.93 million to $3.77 million.
  • The debt-to-equity ratio is very high at 3.34 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.36, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food & Staples Retailing industry and the overall market, ROUNDY'S INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ROUNDY'S INC is currently lower than what is desirable, coming in at 27.34%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.38% trails that of the industry average.
  • ROUNDY'S INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ROUNDY'S INC swung to a loss, reporting -$1.54 versus $0.20 in the prior year. This year, the market expects an improvement in earnings ($0.70 versus -$1.54).
  • You can view the full analysis from the report here: RNDY Ratings Report