NEW YORK ( TheStreet) -- Perfumania Holdings (Nasdaq: PERF) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally weak debt management, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
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- 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 Specialty Retail industry. The net income has significantly decreased by 248.2% when compared to the same quarter one year ago, falling from -$3.76 million to -$13.08 million.
- The debt-to-equity ratio of 1.27 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.42, which clearly demonstrates the inability to cover short-term cash needs.
- 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. Compared to other companies in the Specialty Retail industry and the overall market, PERFUMANIA HOLDINGS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$1.32 million or 109.46% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 33.00%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 219.04% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
-- Written by a member of TheStreet Ratings Staff