Rating Change #4
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 disappointing return on equity, generally higher debt management risk and poor profit margins.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 8.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 73.87% and other important driving factors, this stock has surged by 197.22% 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.
- The debt-to-equity ratio is very high at 21.20 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, USG has managed to keep a strong quick ratio of 1.61, which demonstrates the ability to cover short-term cash needs.
- 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 Building Products industry and the overall market, USG CORP's return on equity significantly trails that of both the industry average and the S&P 500.
USG Corporation, through its subsidiaries, engages in the manufacture and distribution of building materials worldwide. USG has a market cap of $2.44 billion and is part of the industrial goods sector and materials & construction industry. Shares are up 142.8% year to date as of the close of trading on Friday.
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