Limited Brands Inc. Stock Buy Recommendation Reiterated (LTD)

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) -- Limited Brands (NYSE: LTD) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 60.99% to $388.00 million when compared to the same quarter last year. In addition, LIMITED BRANDS INC has also vastly surpassed the industry average cash flow growth rate of -21.12%.
  • 43.30% is the gross profit margin for LIMITED BRANDS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.00% trails the industry average.
  • LIMITED BRANDS INC's earnings per share declined by 32.9% 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, LIMITED BRANDS INC increased its bottom line by earning $2.71 versus $2.42 in the prior year. This year, the market expects an improvement in earnings ($2.86 versus $2.71).
  • LTD, with its decline in revenue, underperformed when compared the industry average of 12.7%. Since the same quarter one year prior, revenues slightly dropped by 2.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • LTD's share price has surged by 26.36% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

Limited Brands, Inc. operates as a specialty retailer of women's intimate and other apparel, beauty, and personal care products and accessories primarily in the United States and Canada. The company has a P/E ratio of 21.2, below the average retail industry P/E ratio of 21.3 and above the S&P 500 P/E ratio of 17.7. Limited has a market cap of $14.44 billion and is part of the services sector and retail industry. Shares are up 24.5% year to date as of the close of trading on Thursday.

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

--Written by a member of TheStreet Ratings Staff.

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