NEW YORK ( TheStreet) -- Perfumania Holdings (Nasdaq: PERF) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally poor debt management and weak operating cash flow. Highlights from the ratings report include:
- The debt-to-equity ratio is very high at 2.59 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.37, which clearly demonstrates the inability to cover short-term cash needs.
- Net operating cash flow has decreased to $48.21 million or 29.16% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, PERFUMANIA HOLDINGS INC has marginally lower results.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.0%. Since the same quarter one year prior, revenues fell by 11.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- PERFUMANIA HOLDINGS INC has improved earnings per share by 25.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, PERFUMANIA HOLDINGS INC continued to lose money by earning -$0.41 versus -$1.77 in the prior year.
- Powered by its strong earnings growth of 25.43% and other important driving factors, this stock has surged by 43.82% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.