TSC Ratings' Updates: Finish Line

We've initiated coverage on Sterlite Industries(SLT Quote), a non-ferrous metals and mining company in India and Australia, at sell, driven by its deteriorating net income, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Net income has significantly decreased by 28.9% since the same quarter last year, from $282.36 million to $200.70 million, underperforming the metals and mining industry but outperforming the S&P 500. Sterlite's gross profit margin of 28.1% is is currently lower than what is desirable, though it has increased significantly from the same period last year. Its net profit margin of 15% is significantly lower than it was in the same period one year prior.

Sterlite's EPS declined by 31.7% in the most recent quarter compared with the same quarter last year. The company has reported a trend of declining earnings per share over the past year, but the consensus estimate suggests that this trend should reverse in the coming year. Revenue fell by 21.1% since the same quarter last year.

The stock is down 74.3% year over year, underperforming the S&P 500. Naturally, the overall market trend is bound to be a significant factor, and in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.