NEW YORK ( TheStreet) -- Tanger Factory Outlet Centers (NYSE: SKT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally poor debt management and poor profit margins. Highlights from the ratings report include:
- SKT's revenue growth has slightly outpaced the industry average of 16.9%. Since the same quarter one year prior, revenues rose by 17.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- TANGER FACTORY OUTLET CTRS's earnings per share declined by 18.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TANGER FACTORY OUTLET CTRS increased its bottom line by earning $0.51 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($0.56 versus $0.51).
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 13.5% when compared to the same quarter one year ago, dropping from $9.40 million to $8.13 million.
- The debt-to-equity ratio is very high at 2.15 and currently higher than the industry average, implying that there is very poor management of debt levels within the company.
-- Written by a member of TheStreet Ratings Staff