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) -- Gordman's Stores (Nasdaq: GMAN) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Multiline Retail industry average. The net income has decreased by 15.9% when compared to the same quarter one year ago, dropping from $4.75 million to $4.00 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GMAN has underperformed the S&P 500 Index, declining 23.10% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- GORDMANS STORES INC's earnings per share declined by 16.0% 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, GORDMANS STORES INC increased its bottom line by earning $1.31 versus $0.49 in the prior year. For the next year, the market is expecting a contraction of 11.1% in earnings ($1.17 versus $1.31).
- 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. When compared to other companies in the Multiline Retail industry and the overall market, GORDMANS STORES INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- GMAN's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.40 is very weak and demonstrates a lack of ability to pay short-term obligations.
-- Written by a member of TheStreet Ratings Staff