Editor's Note: 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 NEW YORK ( TheStreet) -- Collective Brands (NYSE: PSS) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and revenue growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.
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- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 25.8% when compared to the same quarter one year prior, rising from $26.40 million to $33.20 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.0%. Since the same quarter one year prior, revenues slightly increased by 5.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- COLLECTIVE BRANDS INC has improved earnings per share by 28.6% 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, COLLECTIVE BRANDS INC swung to a loss, reporting -$2.69 versus $1.74 in the prior year. This year, the market expects an improvement in earnings ($1.39 versus -$2.69).
- PSS's debt-to-equity ratio of 0.89 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.82 is weak.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, COLLECTIVE BRANDS INC's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff