Welcome to the Stock of the Day.
Brick-and-mortar book seller Barnes & Noble (BKS) is in focus after Liberty Media (LMCA) announced that it’s selling the bulk of its 17% stake in BKS. This caused Barnes & Noble stock to plunge over 13% during trading today. Could this perhaps be a buying opportunity or a sign to stay away?
Find out now.
Barnes & Noble is one of the largest book retailers in the U.S, operating 675 bookstores throughout the 50 states and serving about 690 colleges across the nation with campus bookshops.
In addition to books print books, magazines and other reading material, Barnes & Noble has staked its claim in the tablet world. The company’s Nook products were one of the first on the e-reader market, battling it out with Amazon’s Kindle and Apple’s iPad.
When Barnes & Noble releases fiscal fourth-quarter results at the end of May, the analyst community expects it to record a loss of 59 cents per share on $1.19 billion in sales. Ouch!
Compared with the year ago quarter this translates to a 6.7% drop in sales and 67.2% earnings growth. I don’t like Barnes & Noble’s earnings prospects: It’s expected to be in the red for the foreseeable future. It’s clear that the increase in online competitors like Amazon (AMZN) has done a number on Barnes & Noble’s business plan.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. And fundamentally, BKS has it rough. Of the eight metrics I graded this Aggressive stock on, BKS outright fails on three: Sales growth (F), return on equity (F) and cash flow (D).
It receives Cs on two: Operating margin growth and earnings growth. And it earns As on the others: Earnings momentum, earnings surprises and analyst earnings revisions. So the company receives a C for its Fundamental Grade.
Meanwhile, BKS also earns a C for its Quantitative Grade, indicating that this stock is still a little too risky to recommend for new money.
Bottom Line: As of this posting I consider Barnes & Noble stock a C-rated Hold.
Would you like to check the fundamentals backing up one of your stocks? For more stock grades, please visit my Portfolio Grader website!