NEW YORK (TheStreet) -- Shares of Abercrombie & Fitch (ANF) are higher by 0.84% to $39.47 in early market trading as the apparel company was upgraded to "neutral" from "under perform" at Bank of America/Merrill Lynch. (BAC), with a $42 price target, up from $33.
The firm said the teen retailer's improved fall line is more on-trend and offsets long-term structural headwinds.
Separately, TheStreet Ratings team rates ABERCROMBIE & FITCH as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ABERCROMBIE & FITCH (ANF) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 72.05% to -$40.14 million when compared to the same quarter last year. In addition, ABERCROMBIE & FITCH has also vastly surpassed the industry average cash flow growth rate of -3.34%.
- ANF's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.91 is somewhat weak and could be cause for future problems.
- The gross profit margin for ABERCROMBIE & FITCH is rather high; currently it is at 69.37%. Regardless of ANF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.87% trails the industry average.
- The share price of ABERCROMBIE & FITCH has not done very well: it is down 21.27% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- 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, ABERCROMBIE & FITCH'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: ANF Ratings Report