NEW YORK (TheStreet) -- Shares of Sears Holdings Corp. (SHLD) are lower by 3.82% to $28.43 in late morning trading on Thursday, after Credit Suisse issued a negative analyst note, suggesting the department store should liquidate its assets while it can, out of consideration for its vendors and shareholders, MarketWatch reports.
Credit Suisse currently has an "underperform" rating and $20 price target on Sears' stock.
Analyst Gary Balter said Sears is generating negative cash flow of $1 billion to $2 billion for 2014. "Unless it sells off real assets while somehow maintaining the cash flow from those assets, this story is not likely to have a happy ending, and that ending continues to depend on suppliers," MarketWatch added.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
The analyst also said three events put supplier confidence in jeopardy: a poor quarterly earnings report for the 2014 second quarter, a lack of new financing options, and the company's own statement that it's not committed to apparel buys for the Christmas season.
"While we don't know where that will end, we end with the same argument we have been using for years now. If the assets are worth that much, liquidate, as operating is taking over $10 a share of value away every year," the note said, according to MarketWatch.
Separately, TheStreet Ratings team rates SEARS HOLDINGS CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate SEARS HOLDINGS CORP (SHLD) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 Multiline Retail industry. The net income has significantly decreased by 195.4% when compared to the same quarter one year ago, falling from -$194.00 million to -$573.00 million.
- The debt-to-equity ratio is very high at 8.41 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.17, which clearly demonstrates the inability to cover short-term cash needs.
- 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 Multiline Retail industry and the overall market, SEARS HOLDINGS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for SEARS HOLDINGS CORP is rather low; currently it is at 21.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.15% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$187.00 million or 9250.00% 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: SHLD Ratings Report