Update (9:50 a.m.): Updated with Thursday market open information.
NEW YORK (TheStreet) -- Dick's Sporting Goods (DKS) received a downgrade to "equal weight" from Morgan Stanley. The firm conducted a survey that suggests the company could face increased competition in the future, which led to the downgrade.
The stock was falling 1.87% to $52.91 shortly after the market opened on Thursday.
TheStreet Ratings team rates DICKS SPORTING GOODS INC as a Buy with a ratings score of B+. The team has this to say about their recommendation:
"We rate DICKS SPORTING GOODS INC (DKS) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 6.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- DICKS SPORTING GOODS INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DICKS SPORTING GOODS INC increased its bottom line by earning $2.31 versus $2.10 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $2.31).
- 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, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- DKS's debt-to-equity ratio is very low at 0.08 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 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, DICKS SPORTING GOODS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: DKS Ratings Report