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) -- ALCO Stores (Nasdaq: ALCS) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins and generally high debt management risk.
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- 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 Multiline Retail industry. The net income has significantly decreased by 29.9% when compared to the same quarter one year ago, falling from -$1.28 million to -$1.67 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Multiline Retail industry and the overall market, ALCO STORES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ALCO STORES INC is currently lower than what is desirable, coming in at 29.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.41% trails that of the industry average.
- ALCS's debt-to-equity ratio of 0.87 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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.21 is very low and demonstrates very weak liquidity.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
-- Written by a member of TheStreet Ratings Staff