Stock To Watch: Office Depot (ODP) In Perilous Reversal

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

  • ODP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $68.7 million.
  • ODP has traded 3.6 million shares today.
  • ODP is down 3.6% today.
  • ODP was up 24.9% yesterday.

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More details on ODP:

Office Depot, Inc., together with its subsidiaries, supplies office products and services. Currently there are 4 analysts that rate Office Depot a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Office Depot has been 8.0 million shares per day over the past 30 days. Office Depot has a market cap of $2.7 billion and is part of the services sector and specialty retail industry. The stock has a beta of 3.47 and a short float of 8.5% with 3.60 days to cover. Shares are up 19.7% year-to-date as of the close of trading on Tuesday.

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 Office Depot as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, 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 deteriorating net income, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • ODP's very impressive revenue growth greatly exceeded the industry average of 1.5%. Since the same quarter one year prior, revenues leaped by 58.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • OFFICE DEPOT 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. 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, OFFICE DEPOT INC continued to lose money by earning -$0.22 versus -$0.40 in the prior year. This year, the market expects an improvement in earnings ($0.17 versus -$0.22).
  • ODP's debt-to-equity ratio of 0.87 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 0.73 is weak.
  • Net operating cash flow has significantly decreased to -$88.00 million or 28942.90% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 252.3% when compared to the same quarter one year ago, falling from -$54.21 million to -$191.00 million.

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

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