Rent-A-Center Inc. Stock Downgraded (RCII)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Rent-A-Center (Nasdaq: RCII) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

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Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 1.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for RENT-A-CENTER INC is rather high; currently it is at 68.86%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.69% trails the industry average.
  • 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 Specialty Retail industry. The net income has significantly decreased by 72.5% when compared to the same quarter one year ago, falling from $47.46 million to $13.06 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. In comparison to the other companies in the Specialty Retail industry and the overall market, RENT-A-CENTER INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

Rent-A-Center, Inc., together with its subsidiaries, leases household durable goods to customers on a rent-to-own basis. It operates in four segments: Core U.S., RAC Acceptance, International, and ColorTyme. The company has a P/E ratio of 13.5, below the S&P 500 P/E ratio of 17.7. Rent-A-Center has a market cap of $1.67 billion and is part of the services sector and specialty retail industry. Shares are down 27.1% year to date as of the close of trading on Wednesday.

You can view the full Rent-A-Center Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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