Perilous Reversal Stock: Aeropostale (ARO)

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 Aeropostale ( ARO) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Aeropostale as such a stock due to the following factors:

  • ARO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $34.1 million.
  • ARO has traded 484,691 shares today.
  • ARO is down 3.1% today.
  • ARO was up 8.9% yesterday.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in ARO with the Ticky from Trade-Ideas. See the FREE profile for ARO NOW at Trade-Ideas

More details on ARO:

Aeropostale, Inc., together with its subsidiaries, operates as a mall-based specialty retailer of casual apparel and accessories. Currently there are no analysts that rate Aeropostale a buy, 2 analysts rate it a sell, and 18 rate it a hold.

The average volume for Aeropostale has been 3.4 million shares per day over the past 30 days. Aeropostale has a market cap of $300.4 million and is part of the services sector and retail industry. The stock has a beta of 2.57 and a short float of 33.8% with 2.55 days to cover. Shares are down 54.2% year-to-date as of the close of trading on Wednesday.

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

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Aeropostale as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 89.2% when compared to the same quarter one year ago, falling from -$33.73 million to -$63.82 million.
  • 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, AEROPOSTALE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for AEROPOSTALE INC is rather low; currently it is at 15.79%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -16.10% is significantly below that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 65.77%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 88.37% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • AEROPOSTALE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, AEROPOSTALE INC swung to a loss, reporting -$1.82 versus $0.43 in the prior year. This year, the market expects an improvement in earnings (-$1.69 versus -$1.82).

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

null

More from Markets

Online Retailers Hit by Supreme Court Ruling Requiring Sales Tax Collection

Online Retailers Hit by Supreme Court Ruling Requiring Sales Tax Collection

U.S. Drillers at Mercy of Iran, Saudi Production Spat as OPEC Meeting Begins

U.S. Drillers at Mercy of Iran, Saudi Production Spat as OPEC Meeting Begins

Stocks Tumble as Dow Heads for Eighth Straight Drop

Stocks Tumble as Dow Heads for Eighth Straight Drop

This Is What's Hot Thursday - Stocks Slide, Intel's CEO Woes & Major Movers

This Is What's Hot Thursday - Stocks Slide, Intel's CEO Woes & Major Movers

Video: Jim Cramer on Netflix, Disney, Intel, Micron and Goldman Sachs

Video: Jim Cramer on Netflix, Disney, Intel, Micron and Goldman Sachs