Why RadioShack (RSH) Stock Is Down Today

NEW YORK (TheStreet) -- RadioShack (RSH) was falling -8.2% to $1.35 Friday on news that it will close fewer stores than it originally planned.

In a regulatory filing the retailer said that it will abandon its plan to close 1,100 after running into issues during discussions with its lenders. "The terms on which the lenders are currently willing to provide this consent are not acceptable to the company," RadioShack said in the filing.

While it won't close the number of stores it originally plans, RadioShack said it is "continuing with a plan to close fewer stores and pursuing other cost reduction measures permitted under the existing terms of the 2018 Credit Agreement and 2018 Term Loan."

Must read: Warren Buffett's 10 Favorite Growth Stocks

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

TheStreet Ratings team rates RADIOSHACK CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate RADIOSHACK CORP (RSH) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."

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

  • 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 significantly decreased by 202.4% when compared to the same quarter one year ago, falling from -$63.30 million to -$191.40 million.
  • The debt-to-equity ratio is very high at 2.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, RSH maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, RADIOSHACK CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for RADIOSHACK CORP is currently lower than what is desirable, coming in at 29.88%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -20.46% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$139.80 million or 85.41% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: RSH Ratings Report

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

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.

More from Markets

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Trump Takes Aim at Auto Imports; Markets End Mixed -- ICYMI

Trump Takes Aim at Auto Imports; Markets End Mixed -- ICYMI

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

Flashback Friday: The Market Movers

Flashback Friday: The Market Movers