NEW YORK ( TheStreet) -- Brazilian Distribution Company (NYSE: CBD) 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 and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally poor debt management and disappointing return on equity. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Food & Staples Retailing industry average. The net income increased by 12.6% when compared to the same quarter one year prior, going from $81.29 million to $91.51 million.
- Net operating cash flow has significantly increased by 65.40% to -$308.90 million when compared to the same quarter last year. Despite an increase in cash flow of 65.40%, CIA BRASILEIRA DE DISTRIB is still growing at a significantly lower rate than the industry average of 137.66%.
- CIA BRASILEIRA DE DISTRIB reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CIA BRASILEIRA DE DISTRIB reported lower earnings of $1.54 versus $1.73 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $1.54).
- The debt-to-equity ratio of 1.42 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, CBD maintains a poor quick ratio of 0.88, which illustrates the inability to avoid short-term cash problems.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Food & Staples Retailing industry and the overall market, CIA BRASILEIRA DE DISTRIB's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff