Rating Change #9
Headwaters Inc (HW) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, disappointing return on equity and poor profit margins.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 13.6%. Since the same quarter one year prior, revenues rose by 16.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 84.04% and other important driving factors, this stock has surged by 36.85% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- HEADWATERS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HEADWATERS INC reported poor results of -$2.20 versus -$0.82 in the prior year. This year, the market expects an improvement in earnings (-$0.38 versus -$2.20).
- The debt-to-equity ratio is very high at 37.32 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, HW maintains a poor quick ratio of 0.97, which illustrates the inability to avoid short-term cash problems.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Construction Materials industry and the overall market, HEADWATERS INC's return on equity significantly trails that of both the industry average and the S&P 500.
Headwaters Incorporated provides products, technologies, and services for the building products, construction material, and energy industries primarily in the United States and Canada. Headwaters has a market cap of $269.4 million and is part of the industrial goods sector and materials & construction industry. Shares are up 86.9% year to date as of the close of trading on Friday.You can view the full Headwaters Ratings Report or get investment ideas from our investment research center.