Why Realogy (RLGY) Stock Is Lower Today

NEW YORK (TheStreet) -- Shares of Realogy Holdings Corp. (RLGY) are down 3.50% to $38.85 after the company was downgraded to "underperform" from "neutral" by Credit Suisse.

Credit Suisse lowered the real estate and relocation services company due to weaker early fall trends that it says will likely continue to drive downside. 

Credit Suisse set a price target of $37.

TheStreet Ratings team rates REALOGY HOLDINGS CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate REALOGY HOLDINGS CORP (RLGY) a SELL. This is driven by a number of negative factors, 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 unimpressive growth in net income, generally high debt management risk, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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 underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Management & Development industry average. The net income has decreased by 19.0% when compared to the same quarter one year ago, dropping from $84.00 million to $68.00 million.
  • Although RLGY's debt-to-equity ratio of 2.05 is very high, it is currently less than that of the industry average. Along with the unfavorable debt-to-equity ratio, RLGY maintains a poor quick ratio of 0.83, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for REALOGY HOLDINGS CORP is rather low; currently it is at 24.34%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.49% trails that of the industry average.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RLGY has underperformed the S&P 500 Index, declining 10.06% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • REALOGY HOLDINGS CORP's earnings per share declined by 19.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, REALOGY HOLDINGS CORP turned its bottom line around by earning $2.96 versus -$3.73 in the prior year. For the next year, the market is expecting a contraction of 63.9% in earnings ($1.07 versus $2.96).
  • You can view the full analysis from the report here: RLGY Ratings Report
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