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) -- Stage Stores (NYSE: SSI) has been downgraded by TheStreet Ratings from buy to hold. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.
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- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.09 is very weak and demonstrates a lack of ability to pay short-term obligations.
- SSI, with its decline in revenue, slightly underperformed the industry average of 6.8%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- STAGE STORES INC's earnings per share declined by 21.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, STAGE STORES INC increased its bottom line by earning $1.17 versus $0.97 in the prior year. For the next year, the market is expecting a contraction of 4.3% in earnings ($1.12 versus $1.17).
- 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 decreased by 23.9% when compared to the same quarter one year ago, dropping from -$8.86 million to -$10.97 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, SSI has underperformed the S&P 500 Index, declining 19.89% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.