Why Aaron's (AAN) Is Up Today

NEW YORK (TheStreet) -- Aaron's (AAN) was gaining 12.9% to $30.55 on Friday after it received an offer from Vintage Capital to buy the electronics and furniture renter for $2.3 billion.

The private-equity firm offered to pay $30.50 a share for Aaron's. Vintage Capital and its affiliates hold a nearly 10% stake on Aaron's. The firm said it privately offered to acquire the company three times since 2011.

The offer comes shortly after Aaron's announced fourth-quarter earnings, which beat analysts estimates. 

The company posted earnings of 30 cents a share for the quarter, beating the Capital IQ Consensus Estimate of 29 cents a share. Revenue fell 2.6% to $553.9 million for the quarter, which was in-line with analysts estimates of $554.9 million.

Must read: Trade-Ideas: Aaron's (AAN) Is Today's "Barbarian At The Gate" Stock

TheStreet Ratings team rates AARON'S INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about its recommendation:

"We rate AARON'S INC (AAN) a BUY. This is driven by multiple strengths, 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, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations and expanding profit margins. 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 7.3%. Since the same quarter one year prior, revenues slightly increased by 1.9%. 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.
  • AAN's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • Net operating cash flow has significantly increased by 221.15% to $128.17 million when compared to the same quarter last year. In addition, AARON'S INC has also vastly surpassed the industry average cash flow growth rate of 3.31%.
  • The gross profit margin for AARON'S INC is currently very high, coming in at 84.67%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.91% trails the industry average.
  • You can view the full analysis from the report here: AAN Ratings Report

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