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Metals USA Holdings Corp Stock Downgraded (MUSA)

Editor's Note: 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.

NEW YORK (TheStreet) -- Metals USA Holdings (NYSE:MUSA) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins, weak operating cash flow, generally high debt management risk and feeble growth in its earnings per share.

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Highlights from the ratings report include:

  • The gross profit margin for METALS USA HOLDINGS CORP is currently extremely low, coming in at 8.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.50% significantly trails the industry average.
  • Net operating cash flow has significantly decreased to -$0.50 million or 119.23% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Currently the debt-to-equity ratio of 1.71 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, MUSA has managed to keep a strong quick ratio of 2.09, which demonstrates the ability to cover short-term cash needs.
  • METALS USA HOLDINGS CORP's earnings per share declined by 10.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, METALS USA HOLDINGS CORP increased its bottom line by earning $1.72 versus $0.31 in the prior year. For the next year, the market is expecting a contraction of 3.5% in earnings ($1.66 versus $1.72).
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Metals & Mining industry average, but is less than that of the S&P 500. The net income has decreased by 11.6% when compared to the same quarter one year ago, dropping from $21.50 million to $19.00 million.
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Metals USA Holdings Corp. provides carbon steel, stainless steel, aluminum, red metals, manufactured metal components, and inventory management services in the United States and Canada. The company has a P/E ratio of 7.4, equal to the average metals & mining industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Metals USA has a market cap of $484.6 million and is part of the basic materials sector and metals & mining industry. Shares are up 15% year to date as of the close of trading on Monday.

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

-- Written by a member of TheStreet Ratings Staff

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