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Kingold Jewelry Inc. Stock Downgraded (KGJI)

NEW YORK ( TheStreet) -- Kingold Jewelry (Nasdaq: KGJI) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

  • The gross profit margin for KINGOLD JEWELRY INC is currently extremely low, coming in at 5.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.30% trails that of the industry average.
  • KGJI's debt-to-equity ratio is very low at 0.05 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 0.85 is somewhat weak and could be cause for future problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market on the basis of return on equity, KINGOLD JEWELRY INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • After a year of stock price fluctuations, the net result is that KGJI's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • KINGOLD JEWELRY INC has improved earnings per share by 18.2% 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. During the past fiscal year, KINGOLD JEWELRY INC increased its bottom line by earning $0.51 versus $0.42 in the prior year.

Kingold Jewelry, Inc. engages in the design, manufacture, and sale of gold jewelry and Chinese ornaments in the People's Republic of China. It provides a range of gold products, including gold necklaces, rings, earrings, bracelets, pendants, and gold bars. The company has a P/E ratio of 3.4, equal to the average metals & mining industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Kingold has a market cap of $98.8 million and is part of the basic materials sector and metals & mining industry. Shares are up 122.8% year to date as of the close of trading on Friday.

You can view the full Kingold Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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