Ruby Tuesday Inc. Stock Downgraded (RT)

NEW YORK ( TheStreet) -- Ruby Tuesday (NYSE: RT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • RT's revenue growth trails the industry average of 12.3%. Since the same quarter one year prior, revenues slightly increased by 1.8%. 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.
  • The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.13 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 71.7% when compared to the same quarter one year ago, falling from $16.00 million to $4.54 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, RUBY TUESDAY INC's return on equity significantly trails that of both the industry average and the S&P 500.

Ruby Tuesday, Inc., together with its subsidiaries, develops, operates, and franchises casual dining restaurants in the United States, Puerto Rico, Guam, and internationally. The company has a P/E ratio of 24, equal to the average leisure industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Ruby Tuesday has a market cap of $459.3 million and is part of the services sector and leisure industry. Shares are down 0.9% year to date as of the close of trading on Monday.

You can view the full Ruby Tuesday Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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