NEW YORK (TheStreet) -- Shares of Hanesbrands Inc. (HBI) are up 5.49% to $93.40 in pre-market trading on Wednesday, after it said it will buy former sister company DBApparel in a deal valuing it at $545 million.
Hanesbrands said the deal is expected to add more than $875 million in annual net sales and about $125 million in adjusted operating profit within three or four years.
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Separately, TheStreet Ratings team rates HANESBRANDS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate HANESBRANDS INC (HBI) 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 solid stock price performance, revenue growth, expanding profit margins, good cash flow from operations and reasonable valuation levels. 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:
- Compared to its closing price of one year ago, HBI's share price has jumped by 66.34%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HBI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.8%. Since the same quarter one year prior, revenues rose by 12.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- 37.25% is the gross profit margin for HANESBRANDS INC which we consider to be strong. 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 3.92% trails the industry average.
- Net operating cash flow has increased to -$62.24 million or 21.29% when compared to the same quarter last year. Despite an increase in cash flow of 21.29%, HANESBRANDS INC is still growing at a significantly lower rate than the industry average of 89.61%.
- HANESBRANDS INC's earnings per share declined by 19.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HANESBRANDS INC increased its bottom line by earning $3.25 versus $2.31 in the prior year. This year, the market expects an improvement in earnings ($4.99 versus $3.25).
- You can view the full analysis from the report here: HBI Ratings Report