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Why GSE Holding (GSE) Is Plummeting Today

NEW YORK (TheStreet) -- GSE Holding Inc.  (GSE) was plummeting 44% to 78 cents on Monday after NYSE Regulations notified the company that it had fallen below compliance with the New York Stock Exchange's continued listing standards.

The company, which manufactures and markets geosynthetic lining products for containment solutions for environmental protection and confinement applications around the world, fell below the criteria established by the NYSE's continued listing standards for two reasons. Firstly, its average global equity market capitalization dropped to less than $50 million on a 30-day trading period. Secondly, the company's stockholders' equity had fallen to less than $50 million in its latest quarterly report, which it filed with the Securities and Exchange Commission on Nov. 10, 2013 for the period that ended on Sept. 30, 2013.

GSE plans to inform the NYSE that it would submit a plan within 45 days of receiving the notice that would illustrate how the company intends to reestablish compliance with 18 months. The NYSE then has 45 days within receipt of that plan to review it and decide if it is reasonable. The NYSE can then either accept the plan, at which point GSE would be subject to monitoring, or refuse the plan, at which point GSE would undergo suspension and de-listing procedures.

As of 2:05 p.m., the stock had hit a one-year low of 72 cents and had a volume of approximately 3.67 million, well above its average volume of 187,862. 

TheStreet Ratings team rates GSE Holding as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate GSE HOLDING INC (GSE) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is very high at 6.38 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.44, which clearly demonstrates the inability 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 Chemicals industry and the overall market, GSE HOLDING INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for GSE HOLDING INC is currently extremely low, coming in at 14.82%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -30.36% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$5.22 million or 152.11% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • GSE HOLDING INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, GSE HOLDING INC swung to a loss, reporting -$0.03 versus $0.16 in the prior year. For the next year, the market is expecting a contraction of 2000.0% in earnings (-$0.63 versus -$0.03).
  • You can view the full analysis from the report here: GSE Ratings Report

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