NEW YORK (TheStreet) -- Aaron's (AAN) was falling 7.9% to $28.06 Tuesday after rejecting a $2.3 billion shareholder buyout offer and acquiring retail a retail credit financing firm for about $700 million.
In a note to shareholders Aaron's said its board rejected the $2.3 billion offer from Vintage Capital Management as "inadequate, illusory and not in the best interests of Aaron's shareholders."
In the same note, the company said it identified Progressive Finance Holdings as "an ideal acquisition target," saying it will give the retailer a chance to lead the virtual rent-to-own market. The company expects Progressive to deliver investor returns, noting the company's standalone revenues of $403 million in 2013, up from $228 million in 2012.
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TheStreet Ratings team rates AARON'S INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AARON'S INC (AAN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations, expanding profit margins and increase in stock price during the past year. 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:
- AAN's debt-to-equity ratio is very low at 0.13 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 337.89% to $63.96 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 -6.80%.
- The gross profit margin for AARON'S INC is currently very high, coming in at 81.17%. 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 4.09% trails the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.3%. Since the same quarter one year prior, revenues slightly dropped by 2.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: AAN Ratings Report