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Why Ion Geophysical Corp (IO) Is Tumbling on Wednesday

NEW YORK (TheStreet) -- Ion Geophysical Corp (IO) is trading lower on Wednesday after receiving a downgrade from Barclays.

By early afternoon, shares had gapped 6.7% to $4.02.

The investment firm downgraded Ion to "equal weight" from "overweight" and cut its price target to $4 from $5.

Barclays justified the ratings revision by noting continued pressure in seismic end markets, the market Ion currently provides with its subsurface exploratory equipment and technology. The firm said the company will see a recovery once sentiment in the market improves, but until then sees better value stocks elsewhere.

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TheStreet Ratings team rates ION GEOPHYSICAL CORP as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate ION GEOPHYSICAL CORP (IO) a SELL. This is driven by multiple weaknesses, 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 deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 27.0% when compared to the same quarter one year ago, falling from $27.17 million to $19.82 million.
  • 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 Energy Equipment & Services industry and the overall market, ION GEOPHYSICAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 41.66%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 29.41% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • ION GEOPHYSICAL CORP's earnings per share declined by 29.4% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ION GEOPHYSICAL CORP swung to a loss, reporting -$1.61 versus $0.39 in the prior year. This year, the market expects an improvement in earnings ($0.27 versus -$1.61).
  • IO's debt-to-equity ratio of 0.85 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that IO's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.05 is high and demonstrates strong liquidity.

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