NEW YORK ( TheStreet) -- rue21 (Nasdaq: RUE) 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, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
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- The revenue growth came in higher than the industry average of 8.0%. Since the same quarter one year prior, revenues rose by 18.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RUE21 INC has improved earnings per share by 21.1% 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. This trend suggests that the performance of the business is improving. During the past fiscal year, RUE21 INC increased its bottom line by earning $1.56 versus $1.22 in the prior year. This year, the market expects an improvement in earnings ($1.82 versus $1.56).
- Despite the fact that RUE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.61 is low and demonstrates weak liquidity.
- 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 Specialty Retail industry and the overall market, RUE21 INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- RUE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 26.29%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
-- Written by a member of TheStreet Ratings Staff