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Nevsun Resources Ltd. Stock Downgraded (NSU)

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) -- Nevsun Resources (AMEX:NSU) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and a generally disappointing performance in the stock itself.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • NSU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 13.76, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for NEVSUN RESOURCES LTD is rather high; currently it is at 59.60%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NSU's net profit margin of 14.93% significantly outperformed against the industry.
  • The share price of NEVSUN RESOURCES LTD has not done very well: it is down 23.59% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • NEVSUN RESOURCES LTD has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable Earnings per share over the past year indicate the company has sound management over its earnings and share float. During the past fiscal year, NEVSUN RESOURCES LTD reported lower earnings of $0.71 versus $0.72 in the prior year.
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Nevsun Resources Ltd., a gold and base metal mining and exploration company, together with its subsidiaries, engages acquisition, exploration, development, and production of mineral properties in Africa. The company has a P/E ratio of 5.2, below the S&P 500 P/E ratio of 17.7. Nevsun has a market cap of $593 million and is part of the basic materials sector and metals & mining industry. Shares are down 34.3% year to date as of the close of trading on Friday.

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

-- Written by a member of TheStreet Ratings Staff

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