Will Chico's FAS (CHS) Stock be Affected by Analyst Upgrade?

NEW YORK (TheStreet) -- Shares of Chico's FAS (CHS) are gaining 0.53% to $17.03 in Tuesday's early market trading after analysts at Mizuho upgraded the company to "buy" from "neutral" and raised its price target to $20 from $18.

Analysts expect the company to post strong first quarter results, along with an improvement in momentum in May and benefits from earlier announced cost reduction initiatives.

"With reduced receipts and over $93mm of opex cuts over 3 years along with store fleet rationalization and capital allocation programs, we believe this is an inflection point in CHS' fundamentals and see an 18% upside (to the stock) from current levels," they said.

Despite the slow start to the quarter to the quarter due to adverse weather conditions, analysts maintain their positive outlook and added that they believe the positive comp guidance issued by the company for the first quarter is achievable.

Chico's is a retail women's clothing chain based in Florida.

TheStreet Ratings team rates CHICOS FAS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHICOS FAS INC (CHS) a BUY. This is driven by some important positives, 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 revenue growth, good cash flow from operations, 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 its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 7.6%. 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 64.65% to $101.39 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 32.07%.
  • CHS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
  • This stock has managed to rise its share value by 12.12% over the past twelve months. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • CHICOS FAS INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. 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, CHICOS FAS INC increased its bottom line by earning $0.42 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($0.80 versus $0.42).
  • You can view the full analysis from the report here: CHS Ratings Report

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