Kate Spade (KATE) Marked As A Dead Cat Bounce Stock

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.

Trade-Ideas LLC identified Kate Spade ( KATE) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Kate Spade as such a stock due to the following factors:

  • KATE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $199.3 million.
  • KATE has traded 689,595 shares today.
  • KATE is up 3.5% today.
  • KATE was down 25.4% yesterday.

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More details on KATE:

Kate Spade & Company, together with its subsidiaries, primarily designs and markets a range of apparel and accessories. It operates through KATE SPADE, Adelington Design Group, and JUICY COUTURE segments. KATE has a PE ratio of 78.3. Currently there are 5 analysts that rate Kate Spade a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Kate Spade has been 1.6 million shares per day over the past 30 days. Kate Spade has a market cap of $4.9 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 2.84 and a short float of 5.9% with 1.12 days to cover. Shares are up 21.2% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Kate Spade as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, revenue growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, premium valuation and weak operating cash flow.

Highlights from the ratings report include:
  • Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, KATE SPADE & CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The revenue growth came in higher than the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 33.5%. 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.
  • The gross profit margin for KATE SPADE & CO is rather high; currently it is at 55.31%. Regardless of KATE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KATE's net profit margin of 14.07% compares favorably to the industry average.
  • Net operating cash flow has decreased to -$98.59 million or 49.18% 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.

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

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