Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK (TheStreet) -- Sociedad Quimica Y Minera De Chile (NYSE:SQM) 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 expanding profit margins. 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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- The revenue growth came in higher than the industry average of 2.4%. Since the same quarter one year prior, revenues rose by 17.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, SQM has a quick ratio of 2.18, which demonstrates the ability of the company to cover short-term liquidity needs.
- 46.62% is the gross profit margin for SOC QUIMICA Y MINERA DE CHI which we consider to be strong. Regardless of SQM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SQM's net profit margin of 24.35% compares favorably to the industry average.
- SOC QUIMICA Y MINERA DE CHI's earnings per share improvement from the most recent quarter was slightly positive. 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, SOC QUIMICA Y MINERA DE CHI increased its bottom line by earning $2.47 versus $2.06 in the prior year. For the next year, the market is expecting a contraction of 10.9% in earnings ($2.20 versus $2.47).
- SQM's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 35.26%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. 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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