3 Stocks Driving The Specialty Retail Industry Higher

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.

All three major indices traded up today with the Dow Jones Industrial Average ( ^DJI) trading up 69 points (0.4%) at 16,675 as of Tuesday, May 27, 2014, 3:55 PM ET. The NYSE advances/declines ratio sits at 1,940 issues advancing vs. 1,055 declining with 160 unchanged.

The Specialty Retail industry as a whole closed the day up 1.2% versus the S&P 500, which was up 0.6%. Top gainers within the Specialty Retail industry included Sport Chalet ( SPCHB), up 1.8%, Lentuo International ( LAS), up 16.3%, China Auto Logistics ( CALI), up 9.1%, Mecox Lane ( MCOX), up 5.9% and Trans World Entertainment ( TWMC), up 2.3%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

China Auto Logistics ( CALI) is one of the companies that pushed the Specialty Retail industry higher today. China Auto Logistics was up $0.18 (9.1%) to $2.17 on light volume. Throughout the day, 18,085 shares of China Auto Logistics exchanged hands as compared to its average daily volume of 45,900 shares. The stock ranged in a price between $2.00-$2.34 after having opened the day at $2.00 as compared to the previous trading day's close of $1.99.

China Auto Logistics Inc. sells and trades in imported automobiles in the People's Republic of China. It operates in five segments: Sales of Automobiles, Financing Services, Web-Based Advertising, Automobile Value Added Services, and Auto Mall Management Services. China Auto Logistics has a market cap of $8.0 million and is part of the services sector. Shares are down 44.1% year-to-date as of the close of trading on Friday. Currently there are no analysts who rate China Auto Logistics a buy, no analysts rate it a sell, and none rate it a hold.

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 rates China Auto Logistics as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and disappointing return on equity.

Highlights from TheStreet Ratings analysis on CALI go as follows:

  • Net operating cash flow has significantly increased by 143.12% to $24.26 million when compared to the same quarter last year. In addition, CHINA AUTO LOGISTICS INC has also vastly surpassed the industry average cash flow growth rate of -8.51%.
  • The net income growth from the same quarter one year ago has exceeded that of the Specialty Retail industry average, but is less than that of the S&P 500. The net income increased by 15.8% when compared to the same quarter one year prior, going from -$2.18 million to -$1.84 million.
  • The debt-to-equity ratio is very high at 2.37 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, CALI maintains a poor quick ratio of 0.75, which illustrates the inability to avoid short-term cash problems.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Specialty Retail industry and the overall market, CHINA AUTO LOGISTICS INC's return on equity significantly trails that of both the industry average and the S&P 500.

You can view the full analysis from the report here: China Auto Logistics 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.

At the close, Lentuo International ( LAS) was up $0.31 (16.3%) to $2.21 on heavy volume. Throughout the day, 482,136 shares of Lentuo International exchanged hands as compared to its average daily volume of 46,200 shares. The stock ranged in a price between $2.01-$2.70 after having opened the day at $2.14 as compared to the previous trading day's close of $1.90.

Lentuo International Inc. operates automobile franchise dealerships in the People's Republic of China. Lentuo International has a market cap of $61.9 million and is part of the services sector. Shares are down 30.9% year-to-date as of the close of trading on Friday. Currently there are no analysts who rate Lentuo International a buy, no analysts rate it a sell, and none rate it a hold.

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 rates Lentuo International as a hold. The company's strengths can be seen in multiple areas, such as its 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 poor profit margins.

Highlights from TheStreet Ratings analysis on LAS go as follows:

  • LENTUO INTERNATIONAL -ADR 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, LENTUO INTERNATIONAL -ADR turned its bottom line around by earning $0.12 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($0.34 versus $0.12).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 83.1% when compared to the same quarter one year prior, rising from -$6.61 million to -$1.12 million.
  • LAS, with its decline in revenue, slightly underperformed the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 7.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for LENTUO INTERNATIONAL -ADR is currently extremely low, coming in at 7.54%. Regardless of LAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.76% trails the industry average.
  • LAS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 49.28%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

You can view the full analysis from the report here: Lentuo International 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.

Sport Chalet ( SPCHB) was another company that pushed the Specialty Retail industry higher today. Sport Chalet was up $0.02 (1.8%) to $1.12 on light volume. Throughout the day, 433 shares of Sport Chalet exchanged hands as compared to its average daily volume of 2,400 shares. The stock ranged in a price between $1.12-$1.18 after having opened the day at $1.18 as compared to the previous trading day's close of $1.10.

Sport Chalet, Inc. operates as a specialty sporting goods retailer in the United States. Sport Chalet has a market cap of $2.0 million and is part of the services sector. Shares are down 13.7% year-to-date as of the close of trading on Friday. Currently there are no analysts who rate Sport Chalet a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Sport Chalet as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and poor profit margins.

Highlights from TheStreet Ratings analysis on SPCHB go as follows:

  • The debt-to-equity ratio is very high at 4.18 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.09, which clearly demonstrates the inability to cover short-term cash needs.
  • 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, SPORT CHALET INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $6.05 million or 48.75% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • SPCHB's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 43.08%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The gross profit margin for SPORT CHALET INC is currently lower than what is desirable, coming in at 29.15%. Regardless of SPCHB's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.52% trails the industry average.

You can view the full analysis from the report here: Sport Chalet 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.

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