Bloomin’ Brands Inc (BLMN), Ann Inc (ANN), ArcelorMittal (ADR) (MT): Tuesday’s Top Upgrades (and Downgrades)

“Product at the LOFT brand shows solid improvement,” says Janney, while “at Ann Taylor, we believe the new fall product recently set in stores is trend- and target-right.” With these two chains catering correctly to their consumers, Janney predicts we will see Ann Inc (NYSE:ANN) capture market share from its rivals going forward.

Be that as it may, the question still remains: Is the valuation right? Should we invest in this stock?

Priced just under 17 times earnings, Ann Inc (NYSE:ANN) actually looks a little bit expensive relative to consensus projections for 12% long-term earnings growth. But the company’s real problem is free cash flow. According to its most recent financials, ANN generated only about $51 million in real cash profits over the past year. That’s barely half $95 million in GAAP net profit that ANN reported earning in the period. It’s such a small number as to push ANN’s price-to-free cash flow ratio up close to 30 — far too high for a 12% grower.

Long story short, I still like ANN the business, and quite a lot. But with the stock up more than 20% off its lows of February, I cannot recommend ANN the stock.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of ArcelorMittal.

The article Tuesday’s Top Upgrades (and Downgrades) originally appeared on Fool.com and is written by Rich Smith.

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