Staples Inc. Stock Hold Recommendation Reiterated (SPLS)

NEW YORK ( TheStreet) -- Staples (Nasdaq: SPLS) has been reiterated by TheStreet Ratings as a hold with a ratings score of C+. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 136.67% to $347.57 million when compared to the same quarter last year. In addition, STAPLES INC has also vastly surpassed the industry average cash flow growth rate of 11.96%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • 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 Specialty Retail industry and the overall market, STAPLES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 27.72%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.92% trails that of the industry average.

Staples, Inc., together with its subsidiaries, operates as an office products company. It operates in three segments: North American Stores & Online, North American Commercial, and International Operations. Staples has a market cap of $10.6 billion and is part of the services sector and specialty retail industry. Shares are up 43.1% year to date as of the close of trading on Tuesday.

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

--Written by a member of TheStreet Ratings Staff.

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