NEW YORK (TheStreet) -- Methes Energies (MEIL - Get Report) surged Friday after the company announced it is nearing completion of a deal with a large national U.S. aggregator and a downstream distributor to provide up to 40 railcars of biodiesel, or up to 1 million gallons, a month for the remainder of 2014 and afterwards.
This qualifies the company as an importer of record of biodiesel into the U.S. and also allows it to create Renewable Identification Numbers, or RIN's, in the country. This should lead to better margins Methes gives the company the ability to sell directly to U.S. buyers.
"We're very excited about the opportunity to bring our Sombra facility to full current production capacity," said company president Nicholas Ng in a statement. "At current prices these new arrangements can add up to $4 million per month to our biodiesel sales. Also, the fact that we can now sell directly to U.S. buyers will make things much easier for us and enhance our ability to attract additional U.S. customers. This might get us to increase capacity in Sombra sooner rather than later."
The stock was up 21.22% to $3.20 at 1:49 p.m. More than 1.2 million shares had changed hands, which dwarfed the average volume of 24,342.
Separately, TheStreet Ratings team rates METHES ENERGIES INTL LTD as a "sell" with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate METHES ENERGIES INTL LTD (MEIL) a SELL. This is driven by several 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 feeble growth in its earnings per share, generally high debt management risk, weak operating cash flow, poor profit margins and deteriorating net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- METHES ENERGIES INTL LTD's earnings per share declined by 10.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, METHES ENERGIES INTL LTD reported poor results of -$0.82 versus -$0.51 in the prior year.
- Currently the debt-to-equity ratio of 1.98 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.16, which clearly demonstrates the inability to cover short-term cash needs.
- Net operating cash flow has decreased to -$2.14 million or 15.93% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The gross profit margin for METHES ENERGIES INTL LTD is currently extremely low, coming in at 5.19%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, MEIL's net profit margin of -31.60% significantly underperformed when compared to the industry average.
- Looking at the price performance of MEIL's shares over the past 12 months, there is not much good news to report: the stock is down 33.06%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
- You can view the full analysis from the report here: MEIL Ratings Report