NEW YORK ( TheStreet) -- Stage Stores (NYSE: SSI) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- SSI's revenue growth has slightly outpaced the industry average of 6.6%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- STAGE STORES INC has improved earnings per share by 7.4% 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. We feel that this trend should continue. During the past fiscal year, STAGE STORES INC increased its bottom line by earning $1.01 versus $0.75 in the prior year. This year, the market expects an improvement in earnings ($1.08 versus $1.01).
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- Although SSI's debt-to-equity ratio of 0.14 is very low, it is currently higher than that of the industry average. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Specialty Retail industry and the overall market, STAGE STORES INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.