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"We rate STAPLES INC (SPLS) a BUY. This is driven by multiple strengths, 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 compelling growth in net income, attractive valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 60.3% when compared to the same quarter one year prior, rising from $135.23 million to $216.79 million.
- Net operating cash flow has increased to $604.60 million or 14.60% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -9.34%.
- 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.76 is somewhat weak and could be cause for future problems.
- SPLS, with its decline in revenue, underperformed when compared the industry average of 9.7%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- You can view the full analysis from the report here: SPLS Ratings Report