NEW YORK ( TheStreet) -- Hanesbrands (NYSE: HBI) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally poor debt management and poor profit margins. Highlights from the ratings report include:
- Net operating cash flow has slightly increased to -$94.12 million or 6.84% when compared to the same quarter last year. Despite an increase in cash flow, HANESBRANDS INC's cash flow growth rate is still lower than the industry average growth rate of 40.89%.
- HBI, with its decline in revenue, underperformed when compared the industry average of 17.4%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 155.8% when compared to the same quarter one year ago, falling from $48.11 million to -$26.83 million.
- The debt-to-equity ratio is very high at 3.25 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. To add to this, HBI has a quick ratio of 0.64, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
-- Written by a member of TheStreet Ratings Staff