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) -- Wolverine World Wide (NYSE: WWW) 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 revenue growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and generally higher debt management risk.
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- WOLVERINE WORLD WIDE reported significant earnings per share improvement 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, WOLVERINE WORLD WIDE increased its bottom line by earning $1.00 versus $0.82 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus $1.00).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 54.3% when compared to the same quarter one year prior, rising from -$3.72 million to -$1.70 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The debt-to-equity ratio of 1.37 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, WWW has managed to keep a strong quick ratio of 1.86, which demonstrates the ability to cover short-term cash needs.
- 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 Textiles, Apparel & Luxury Goods industry and the overall market, WOLVERINE WORLD WIDE's return on equity is significantly below that of the industry average and is below that of the S&P 500.