NEW YORK ( TheStreet) -- Vera Bradley (Nasdaq: VRA) 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 and weak operating cash flow.
- 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 significantly underperformed when compared to that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 27.2% when compared to the same quarter one year ago, falling from $12.63 million to $9.19 million.
- Net operating cash flow has significantly decreased to $14.88 million or 51.50% when compared to the same quarter last year. Despite a decrease in cash flow VERA BRADLEY INC is still fairing well by exceeding its industry average cash flow growth rate of -83.28%.
- 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 Textiles, Apparel & Luxury Goods industry and the overall market, VERA BRADLEY INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- VRA's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that VRA's debt-to-equity ratio is low, the quick ratio, which is currently 0.68, displays a potential problem in covering short-term cash needs.
- 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. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.