Is It Time to Give Up On Staples?

December 21, 2012

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E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio for Staples is excellent. It’s also much stronger than the debt-to-equity ratios for Office Depot (NYSE:ODP) and OfficeMax International (NYSE:OMX). The balance sheet might not be positive at the moment, but it’s in very manageable shape.

	Debt-To-Equity	Cash	Long-Term Debt
SPLS	.27	$1.02 Billion	$1.66 Billion
ODP	.99	$619.53 Million	$486.04 Million
OMX	1.28	$506.02 Million	$1.34 Billion

T = Technicals on the Stock Chart Are Weak

Staples, Office Depot, and OfficeMax International have all performed poorly on a three-year basis, but Staples is the only one that hasn’t bounced back within the past year. This is a bad sign. It shows that management is being outmaneuvered.

	1 Month	Year-To-Date	1 Year	3 Year
SPLS	.12%	-9.84%	-8.58%	-46.69%
ODP	18.67%	65.58%	71.98%	-45.90%
OMX	5.64%	119.90%	134.90%	-23.20%

At $12.11, Staples is currently trading above its 50-day and 100-day SMA, but below its 200-day SMA.

50-Day SMA	11.56
100-Day SMA	11.72
200-Day SMA	13.03

E = Earnings and Revenue Have Been Inconsistent

Revenue has increased since 2009, but at a very slow pace. What’s interesting here is that out of the three aforementioned companies, Staples is the only one to show a profit every year over the past five years. It’s also the only company to show increased revenue since 2009.

	2008	2009	2010	2011	2012
Revenue ($)in billions	19.37	23.08	24.28	24.55	25.02
Diluted EPS ($)	1.38	1.13	1.02	1.21	1.40

Looking at the last quarter on a YoY basis, we see a decrease in revenue and earnings. This has spooked investors.

	10/2011	1/2012	4/2012	9/2012	10/2012
Revenue ($)in billions	6.48	6.55	6.12	5.50	6.35
Diluted EPS ($)	.47	.40	.27	.18	-.89

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