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) -- Sothebys (NYSE: BID) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- The gross profit margin for SOTHEBY'S is rather high; currently it is at 60.90%. Regardless of BID's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BID's net profit margin of 28.10% significantly outperformed against the industry.
- BID, with its decline in revenue, underperformed when compared the industry average of 4.6%. Since the same quarter one year prior, revenues fell by 17.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.48, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.34 is sturdy.
- SOTHEBY'S's earnings per share declined by 31.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SOTHEBY'S increased its bottom line by earning $2.44 versus $2.32 in the prior year. For the next year, the market is expecting a contraction of 26.0% in earnings ($1.81 versus $2.44).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Diversified Consumer Services industry. The net income has significantly decreased by 32.9% when compared to the same quarter one year ago, falling from $127.23 million to $85.43 million.
-- Written by a member of TheStreet Ratings Staff