NEW YORK ( TheStreet) -- Companhia Brasileira De Distribuicao (NYSE: CBD) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.
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- CIA BRASILEIRA DE DISTRIB has improved earnings per share by 27.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CIA BRASILEIRA DE DISTRIB increased its bottom line by earning $2.01 versus $1.54 in the prior year. This year, the market expects an improvement in earnings ($2.07 versus $2.01).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 27.6% when compared to the same quarter one year prior, rising from $91.51 million to $116.77 million.
- CBD, with its decline in revenue, slightly underperformed the industry average of 3.7%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for CIA BRASILEIRA DE DISTRIB is currently lower than what is desirable, coming in at 26.41%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.76% trails that of the industry average.
- The debt-to-equity ratio of 1.17 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, CBD has a quick ratio of 0.65, this demonstrates the lack of ability of the company to cover short-term liquidity needs.