NEW YORK ( TheStreet) -- Arden Group (Nasdaq: ARDNA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has decreased to $9.40 million or 14.24% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ARDNA has underperformed the S&P 500 Index, declining 12.05% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The net income growth from the same quarter one year ago has exceeded that of the Food & Staples Retailing industry average, but is less than that of the S&P 500. The net income increased by 11.7% when compared to the same quarter one year prior, going from $5.07 million to $5.67 million.
  • 39.90% is the gross profit margin for ARDEN GROUP INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 5.40% is above that of the industry average.
  • ARDNA's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, ARDNA has a quick ratio of 2.08, which demonstrates the ability of the company to cover short-term liquidity needs.

Arden Group, Inc., through its subsidiaries, operates supermarkets in southern California. Its stores offer grocery products, such as dry groceries, produce, meat, seafood, bakery, dairy, wine and liquor, floral, sushi, vitamins, and health and beauty aids; and perishable goods. The company has a P/E ratio of 15.3, equal to the average retail industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Arden Group has a market cap of $276.7 million and is part of the services sector and retail industry. Shares are up 3.2% year to date as of the close of trading on Friday.

You can view the full Arden Group Ratings Report or get investment ideas from our investment research center.
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