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"We rate SAFEWAY INC (SWY) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, solid stock price performance, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SWY's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 1009.3% when compared to the same quarter one year prior, rising from $8.60 million to $95.40 million.
- Powered by its strong earnings growth of 30.76% and other important driving factors, this stock has surged by 44.76% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- SAFEWAY INC has improved earnings per share by 30.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SAFEWAY INC reported lower earnings of $0.97 versus $1.20 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus $0.97).
- SWY's debt-to-equity ratio of 0.68 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.87 is weak.
- You can view the full analysis from the report here: SWY Ratings Report
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