NEW YORK (TheStreet) -- RadioShack (RSH) shares are up 22.8% to 49 cents per share on heavy volume in trading today after the struggling electronics retailer was offered a $500 million loan by Salus Capital Partners, according to the Wall Street Journal.
The unsolicited loan offer would replace a previous $585 million loan agreement the company obtained in 2013.
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The Journal described the loan as a debtor-in-possession loan which is designed to fund a company through bankruptcy and gives the lender a large amount of influence over a company's bankruptcy proceedings.
RadioShack previously said in September that bankruptcy was a possibility if the company's bottom line did not improve.
TheStreet Ratings team rates RADIOSHACK CORP as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate RADIOSHACK CORP (RSH) 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 feeble growth in its earnings per share, deteriorating net income, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RADIOSHACK CORP's earnings per share declined by 42.3% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, RADIOSHACK CORP reported poor results of -$3.89 versus -$1.10 in the prior year. For the next year, the market is expecting a contraction of 2.8% in earnings (-$4.00 versus -$3.89).
- 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 43.3% when compared to the same quarter one year ago, falling from -$112.40 million to -$161.10 million.
- Net operating cash flow has significantly decreased to -$117.90 million or 204.70% 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 gross profit margin for RADIOSHACK CORP is currently lower than what is desirable, coming in at 34.11%. Regardless of RSH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RSH's net profit margin of -24.77% significantly underperformed when compared to the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 84.42%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 42.34% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: RSH Ratings Report