Is Staples a Buy Before the Holidays?

With shares of Staples, Inc. (NASDAQ:SPLS) trading around $11.73, is SPLS a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

The company’s stock price fell off a cliff on August 14 when it lowered its fiscal 2012 earnings expectations, dropping over 14 percent in a day, and 20 percent by August 28. Since then, the price has recovered about 10 percent.

Third-quarter results showed revenue fell 2 percent year over year to $6.35 billion, while earnings tanked from $0.18 per diluted share in second quarter to -$0.89 in the third quarter, compared to $0.47 per share a year ago.

E = Equity to Debt Ratio is Close to Zero

Staples has a debt-to-equity ratio of 0.30, which looks very attractive when compared to its major competitors. With Office Depot, Inc. (NYSE:ODP) sitting at a debt-to-equity ratio of 0.63, and OfficeMax Inc. (NYSE:OMX) at a debt-to-equity ratio of 0.93, Staples carries a relatively low amount of debt compared to its industry.

It’s also important to look at total cash and total debt. This comparison slightly changes the perception of Staples’ debt situation. The company current claims total cash of $1.02 billion and total debt of $1.66 billion. OfficeMax claims less total debt at $971.39 million, but also much less total cash at $506.02 million. Office Depot claims $619.53 million in total cash for the most recent quarter, and $671.11 million in debt.

T = Technicals on the Stock Chart are Weak

As of November 18, the stock price is 2.40 percent above its 20-day simple moving average, or SMA; 1.66 percent above its 50-day SMA; and 11.22 percent below its 200-day SMA.

Since the beginning of 2012, the stock has been in a fairly dramatic downward trend, losing 17.51 percent of its value this year to date, and 16.81 percent year over year.

For comparison, shares of OfficeMax are up 88.55 percent this year to date, and shares of Office Depot are up 26.24 percent this year to date.

Staples is trading in a 52-week range between $10.57 per share at $16.93 per share with a beta of 1.3.