Today's Dead Cat Bounce Stock: Genesco (GCO)

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 Genesco ( GCO) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Genesco as such a stock due to the following factors:

  • GCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $14.7 million.
  • GCO has traded 131,880 shares today.
  • GCO is up 3.3% today.
  • GCO was down 13.2% yesterday.

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More details on GCO:

Genesco Inc. is engaged in the retail and wholesale of footwear, apparel, and accessories. The company operates in five segments: Journeys Group, Schuh Group, Lids Sports Group, Johnston & Murphy Group, and Licensed Brands. GCO has a PE ratio of 21.5. Currently there are 4 analysts that rate Genesco a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Genesco has been 132,900 shares per day over the past 30 days. Genesco has a market cap of $2.0 billion and is part of the services sector and retail industry. The stock has a beta of 1.68 and a short float of 9.3% with 6.28 days to cover. Shares are up 10.3% year-to-date as of the close of trading on Thursday.

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 Genesco as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 7.1%. 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.
  • GCO's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.26 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for GENESCO INC is rather high; currently it is at 52.01%. Regardless of GCO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.76% trails the industry average.

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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