RUTH Accounting Analysis

RUTH’s Financial Statements

RUTH Annual Report

Risk Analysis:

  • Receivables Turnover:  55.67 times per year ~ Fairly Moderate in comparison to that of other companies.  At an average of 55.67 times per year, Ruth’s average collection period is just less than a week (6.5 days).  As a whole, Ruth is on par with their competitors when it comes to the number of times they collect on their accounts receivable.
  • Inventory Turnover: 40.44 times per year~ Relatively Moderate to the industry average.  With an inventory turnover just over 40, the average number of days in inventory is a modest 9 days. Ultimately, Ruth does a good job of turning over their inventory; especially in an industry where your inventory has a limited shelf life.
  • Current Ratio: .42 to 1 ~ Poor compared to other companies.  Ruth’s current ratio is alarming low; indicating more current liabilities over current assets.  In other words, Ruth only has $.42 in current assets for every $1 of current liabilities.
  • Acid Test Ratio: .40 to 1 ~ Relatively Poor.  Related to their low current ratio, Ruth’s low acid test ratio reflects a lack of current assets/ liquidity to cover their current liabilities.
  • Debt to Equity Ratio: 139.7% ~ Comparatively Poor to the industry average.  Ruth’s alarming high debt to equity ratio indicates a higher risk for bankruptcy.  As a result, with such high debt and lack of equity, the risk for bankruptcy is very alarming for potential investors.

Profit Analysis:

  • Gross Profit: 20.95% ~ Comparatively Poor to the industry average.  Earning a gross profit of only 20.95% on their sales indicates that Ruth’s average price on inventory is not much greater than it’s cost per dollar of sales.  In  other words, for every $1 of sales revenue, Ruth spends almost .$80 on inventory.
  • Return on Assets:  6.41% ~ Relatively Poor compared to other companies.  Generally speaking, Ruth’s net income earned from their assets is below the industry average.
  • Profit Margin: 4.46% ~ Relatively Moderate to that of their competitors.  Ruth’s earnings per dollar of sales is only 4.46%; about the industry average.
  • Asset Turnover: 1.44 ~ Relatively Moderate compared to other companies.  Ruth’s  sales per dollar of assets invested is similar to the industry average.
  • Return on Equity: 16.07% ~ Fairly Moderate compared to other companies.  Relative to the industry average, earning $.16 for every $1.00 invested reflects a moderately successful return on assets
  • Price Earnings Ratio: 14.03 ~ Pretty Poor compared to their competitors. Ruth’s ratio of only 14.03 indicates to investors that the stock is priced low in relation to its current earnings.  This may be due to poor future prospects and earnings growth.

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