Stock To Watch: Conn's (CONN) In Perilous Reversal

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.

Trade-Ideas LLC identified Conn's ( CONN) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Conn's as such a stock due to the following factors:

  • CONN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $52.8 million.
  • CONN has traded 371,247 shares today.
  • CONN is down 3.5% today.
  • CONN was up 14.5% yesterday.

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More details on CONN:

Conn's, Inc. is engaged in the specialty retail of durable consumer products in the United States. CONN has a PE ratio of 20.1. Currently there are 5 analysts that rate Conn's a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Conn's has been 2.0 million shares per day over the past 30 days. Conn's has a market cap of $1.4 billion and is part of the services sector and retail industry. The stock has a beta of 0.72 and a short float of 35.3% with 6.90 days to cover. Shares are down 42.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Conn's as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 44.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CONN'S INC 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CONN'S INC increased its bottom line by earning $2.54 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($3.53 versus $2.54).
  • CONN's debt-to-equity ratio of 0.91 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 4.10 is very high and demonstrates very strong liquidity.
  • Net operating cash flow has significantly decreased to -$100.56 million or 168.80% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • CONN has underperformed the S&P 500 Index, declining 8.88% 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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