Rating Change #9
Ternium (TX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, robust revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the ratings report include:
- TERNIUM SA -ADR has improved earnings per share by 7.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TERNIUM SA -ADR increased its bottom line by earning $3.11 versus $1.44 in the prior year. This year, the market expects an improvement in earnings ($3.25 versus $3.11).
- TX's revenue growth trails the industry average of 48.7%. Since the same quarter one year prior, revenues rose by 21.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.33, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that TX's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.61 is high and demonstrates strong liquidity.
- The gross profit margin for TERNIUM SA -ADR is currently lower than what is desirable, coming in at 28.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 8.40% significantly trails the industry average.
- Net operating cash flow has significantly decreased to -$179.33 million or 181.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
Ternium S.A. engages in manufacturing and processing a range of flat and long steel products for construction, home appliances, capital goods, container, food, energy, and automotive industries. The company has a P/E ratio of 8.5, above the average metals & mining industry P/E ratio of 7.8 and below the S&P 500 P/E ratio of 17.7. Ternium has a market cap of $5 billion and is part of the basic materials sector and metals & mining industry. Shares are down 40.2% year to date as of the close of trading on Thursday.You can view the full Ternium Ratings Report or get investment ideas from our investment research center.
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