Will This Analyst Upgrade Affect Staples (SPLS) Stock Today?

NEW YORK (TheStreet) -- Shares of Staples  (SPLS) rose 5.31% to $12.30 in pre-market trading on Monday after Credit Suisse (CS)  upgraded the stock to "outperform" and set a $15 price target.

The firm said the current valuation limits downside and possibility of merger provides an attractive entry.

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Separately, TheStreet Ratings team rates STAPLES INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate STAPLES INC (SPLS) 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 reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow."

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

  • SPLS's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that SPLS's debt-to-equity ratio is low, the quick ratio, which is currently 0.64, displays a potential problem in covering short-term cash needs.
  • SPLS, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 1.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 27.02%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.56% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$56.27 million or 1406725.00% 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: SPLS Ratings Report

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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.

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