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Globe Specialty Metals Inc. Stock Upgraded (GSM)

Stock quotes in this article: GSM

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) -- Globe Specialty Metals (Nasdaq: GSM) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

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Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 19.1%. Since the same quarter one year prior, revenues slightly increased by 8.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, GSM has a quick ratio of 2.08, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Metals & Mining industry average. The net income increased by 12.1% when compared to the same quarter one year prior, going from $13.44 million to $15.07 million.
  • GLOBE SPECIALTY METALS INC has improved earnings per share by 11.1% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GLOBE SPECIALTY METALS INC increased its bottom line by earning $0.72 versus $0.68 in the prior year. For the next year, the market is expecting a contraction of 12.5% in earnings ($0.63 versus $0.72).
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
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Globe Specialty Metals, Inc., together with its subsidiaries, produces and sells silicon metal and silicon-based alloys primarily in North America, Europe, South America, and Asia. The company has a P/E ratio of 43.1, above the S&P 500 P/E ratio of 17.7. Globe Specialty has a market cap of $1.16 billion and is part of the basic materials sector and metals & mining industry. Shares are up 12.7% year to date as of the close of trading on Monday.

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

-- Written by a member of TheStreet Ratings Staff

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.

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