Rating Change #7
Leucadia National Corporation (LUK) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow.
Highlights from the ratings report include:
- LUK's very impressive revenue growth greatly exceeded the industry average of 6.3%. Since the same quarter one year prior, revenues leaped by 1103.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Financial Services industry. The net income increased by 4571.9% when compared to the same quarter one year prior, rising from $10.51 million to $490.88 million.
- LUK's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.
- LUK's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.92%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- 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. In comparison to the other companies in the Diversified Financial Services industry and the overall market, LEUCADIA NATIONAL CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
Leucadia National Corporation engages in beef processing, manufacturing, land based contract oil and gas drilling, gaming entertainment, real estate activities, medical product development, and winery operations in the United States and internationally. The company has a P/E ratio of 10.4, above the average conglomerates industry P/E ratio of 10.2 and below the S&P 500 P/E ratio of 17.7. Leucadia has a market cap of $5.08 billion and is part of the conglomerates sector and conglomerates industry. Shares are down 12% year to date as of the close of trading on Tuesday.You can view the full Leucadia Ratings Report or get investment ideas from our investment research center.