Will This Ratings Upgrade Help Rent-A-Center (RCII) Stock Today?

NEW YORK (TheStreet) -- Rent-A-Center Inc. (RCII) was upgraded to "buy" from "hold" at Canaccord Genuity (CCORF) on Wednesday.

The firm said it raised its rating on the rent-to-own home furnishings, appliances, and other items company, due to its belief the Rent-A-Center's more flexible labor model will help cut costs.

Canaccord upped its price target on the stock to $32 from $25.

Separately, TheStreet Ratings team rates RENT-A-CENTER INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate RENT-A-CENTER INC (RCII) 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 revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RCII's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 1.7%. 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 RENT-A-CENTER INC is currently very high, coming in at 93.92%. 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 2.26% trails the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Specialty Retail industry and the overall market, RENT-A-CENTER INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has significantly decreased to -$51.10 million or 2640.97% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: RCII Ratings Report

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