How Will This Downgrade Affect Big Lots (BIG) Stock Today?

NEW YORK (TheStreet) -- Shares of Big Lots (BIG) are down -1.39% to $41.85 in pre-market trade after Barclays (BCS) downgraded the closeout retailer to "equalweight" from "overweight" with a $45 price target.

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Separately, TheStreet Ratings team rates BIG LOTS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate BIG LOTS INC (BIG) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. 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:

  • BIG's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.12 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 38.24% is the gross profit margin for BIG LOTS INC which we consider to be strong. Regardless of BIG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BIG's net profit margin of 5.15% compares favorably to the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.9%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • BIG LOTS INC's earnings per share declined by 33.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, BIG LOTS INC reported lower earnings of $2.14 versus $2.98 in the prior year. This year, the market expects an improvement in earnings ($2.40 versus $2.14).
  • In its most recent trading session, BIG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • You can view the full analysis from the report here:BIG Ratings Report

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