NEW YORK (TheStreet) -- Pep Boys (PBY) shares are climbing 15.9% to $10.72 in morning trading on Wednesday following reports that the car care business has received interest from multiple suitors for a potential sale, according to the Wall Street Journal.
Private equity firm Golden Gate Capital was identified by the Journal's sources as one of the company's interested in the Philadelphia-based company, though Pep Boys is not currently working with any investment banks on the sale.
The company last received an $804 million takeover offer from private equity firm Gores Group in 2012 but the deal fell apart due to weak financial performance at Pep Boys, according to the Journal.
Pep Boys last posted its quarter results last month, reporting a net loss of 19 cents per share that was 22 cents short of analysts' 3 cent per share earnings expectations.
TheStreet Ratings team rates PEP BOYS-MANNY MOE & JACK as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PEP BOYS-MANNY MOE & JACK (PBY) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- PBY's revenue growth trails the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 1.3%. 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.
- Net operating cash flow has significantly increased by 558.52% to $15.82 million when compared to the same quarter last year. In addition, PEP BOYS-MANNY MOE & JACK has also vastly surpassed the industry average cash flow growth rate of 19.66%.
- The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.19 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Specialty Retail industry and the overall market, PEP BOYS-MANNY MOE & JACK's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for PEP BOYS-MANNY MOE & JACK is rather low; currently it is at 23.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.30% is significantly below that of the industry average.
- You can view the full analysis from the report here: PBY Ratings Report