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Why General Steel Holdings (GSI) Stock Is Up Today

Stocks in this article: GSI RIO

NEW YORK (TheStreet) -- General Steel Holdings  (GSI) shares are up 9.1% to $1.20 in trading on Monday.

The bump follows the Chinese steel producer's announcement that it had reached a supply agreement with Rio Tinto Iron Ore Asia  (RIO) for 1.5 million metric tons of imported iron ore for 2014.

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The company expects the deal to lower procurement costs and increase revenue.

"We are thrilled to sign our first direct supply agreement with Rio Tinto," said General Steel Chairman and Chief Executive Officer Henry Yu. "The ability to directly procure from one of the world's largest suppliers will significantly lower our sourcing costs and ensure timely delivery of the highest quality imported iron ore."

TheStreet Ratings team rates GENERAL STEEL HOLDINGS INC as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENERAL STEEL HOLDINGS INC (GSI) a SELL. This is based on the combination of unfavorable investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. Among the areas we feel are negative, one of the most important has been weak operating cash flow."

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

  • Net operating cash flow has significantly decreased to -$177.97 million or 309.67% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Metals & Mining industry average, but is greater than that of the S&P 500. The net income increased by 99.8% when compared to the same quarter one year prior, rising from -$49.94 million to -$0.10 million.
  • The revenue fell significantly faster than the industry average of 7.9%. Since the same quarter one year prior, revenues fell by 24.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • GENERAL STEEL HOLDINGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, GENERAL STEEL HOLDINGS INC continued to lose money by earning -$0.59 versus -$2.78 in the prior year.
  • You can view the full analysis from the report here: GSI Ratings Report
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