Will This Rating Call Help Mattress Firm (MFRM) Today?

NEW YORK (TheStreet) -- Mattress Firm Holding Corp (MFRM) has been initiated with a "buy" rating and $56 price target, Jefferies said Wednesday. The firm said the stock is a unit growth story with positive new-store economics. 

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Separately, TheStreet Ratings team rates MATTRESS FIRM HOLDING CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate MATTRESS FIRM HOLDING CORP (MFRM) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 20.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MATTRESS FIRM HOLDING CORP has improved earnings per share by 13.6% 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, MATTRESS FIRM HOLDING CORP increased its bottom line by earning $1.54 versus $1.18 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus $1.54).
  • 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, MATTRESS FIRM HOLDING CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 49.46% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • MFRM's debt-to-equity ratio of 0.67 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.34 is very low and demonstrates very weak liquidity.
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