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Randgold Resources Ltd Stock Downgraded (GOLD)

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) -- Randgold Resources (Nasdaq: GOLD) has been downgraded by TheStreet Ratings from buy to hold. 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 and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

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Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 1.5%. Since the same quarter one year prior, revenues rose by 21.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • GOLD's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.17, which clearly demonstrates the ability to cover short-term cash needs.
  • 47.20% is the gross profit margin for RANDGOLD RESOURCES LTD which we consider to be strong. Regardless of GOLD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOLD's net profit margin of 24.46% significantly outperformed against the industry.
  • RANDGOLD RESOURCES LTD's earnings per share declined by 21.9% 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, RANDGOLD RESOURCES LTD increased its bottom line by earning $4.64 versus $4.07 in the prior year. For the next year, the market is expecting a contraction of 10.3% in earnings ($4.16 versus $4.64).
  • In its most recent trading session, GOLD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
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Randgold Resources Limited engages in the exploration and development of gold deposits in Sub-Saharan Africa. The company has a P/E ratio of 15.9, below the S&P 500 P/E ratio of 17.7. Randgold has a market cap of $6.82 billion and is part of the basic materials sector and metals & mining industry. Shares are down 25.4% year to date as of the close of trading on Tuesday.

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

-- Written by a member of TheStreet Ratings Staff

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