NEW YORK ( TheStreet) -- Safeway (NYSE: SWY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 190.4% when compared to the same quarter one year prior, rising from $25.10 million to $72.90 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.6%. Since the same quarter one year prior, revenues slightly increased by 2.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SAFEWAY INC reported significant earnings per share improvement 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, SAFEWAY INC reported lower earnings of $1.53 versus $1.57 in the prior year. This year, the market expects an improvement in earnings ($1.97 versus $1.53).
- The gross profit margin for SAFEWAY INC is currently lower than what is desirable, coming in at 29.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.70% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$541.80 million or 803.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
-- Written by a member of TheStreet Ratings Staff