NEW YORK (TheStreet) -- Shares of VimpelCom Ltd. VIP are down -7.54% to $7.64 after the mobile group said today that it expected sales and core profit to fall this year due to tough price competition in Italy and efforts to defend its market share in Russia, Reuters reports.
The company reported a first quarter decline of 10% in revenues to $5 billion from a year ago, and an 11% drop in earnings before interest, taxation, depreciation and amortisation to $2.1 billion.
Net profit plunged 90% to $39 million, a result of a higher effective tax rate and a $92 million foreign exchange loss.
TheStreet Ratings team rates VIMPELCOM LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate VIMPELCOM LTD (VIP) a SELL. This is driven by a few notable 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, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."
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 Wireless Telecommunication Services industry. The net income has significantly decreased by 1464.1% when compared to the same quarter one year ago, falling from $195.00 million to -$2,660.00 million.
- The debt-to-equity ratio is very high at 2.45 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, VIP maintains a poor quick ratio of 0.71, which illustrates the inability to avoid short-term cash problems.
- 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 Wireless Telecommunication Services industry and the overall market, VIMPELCOM LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $2,010.00 million or 12.64% 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.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.88%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1366.66% 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.
- You can view the full analysis from the report here: VIP Ratings Report