TheStreet’s Quant Ratings stock-modeling service is reaffirming its “Sell” recommendation on Sears (SHLD) , which is Friday’s “Stock of the Day” at our premium Web site Real Money. Sears has plummeted from $44.20 a share to just over $1 in the nearly seven years since our model downgraded the stock to a “Sell” from a “Hold” on December 2, 2011.
Quant Ratings evaluates thousands of stocks on a daily basis using a quantitative model that combines fundamental analysis of a firm’s latest financial statements with technical analysis of a stock’s price moves.
Below is an excerpt from Quant Ratings’ latest analysis of SHLD:
Recently, TheStreet Quant Ratings objectively rated this stock according to its “risk-adjusted” total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer’s view or that of this articles’s author. TheStreet Quant Ratings has this to say about the recommendation:
We rate SEARS HOLDINGS CORP as a Sell with a ratings score of E+. This is based on a variety of negative investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company’s weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.
Highlights from the analysis by TheStreet Quant Ratings goes as follows:
- 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 Multiline Retail industry. The net income has significantly decreased by 273.1% when compared to the same quarter one year ago, falling from $245.00 million to -$424.00 million.
- The gross profit margin for SEARS HOLDINGS CORP is rather low; currently it is at 20.93%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -14.66% is significantly below that of the industry average.
- Net operating cash flow has decreased to -$1,150.00 million or 30.68% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm’s growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock’s performance over the last year: it has tumbled by 79.82%, worse than the S&P 500’s performance. Consistent with the plunge in the stock price, the company’s earnings per share are down 271.61% 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.
- SEARS HOLDINGS CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, SEARS HOLDINGS CORP continued to lose money by earning -$3.55 versus -$20.77 in the prior year.
- You can view the full analysis from the report here: SHLD
— Reported by Kevin Baker in Palm Beach Gardens, FL