NEW YORK (TheStreet) -- Shares of Diamond Foods, Inc. (DMND - Get Report) are up 2.10% to $28.16 in pre-market trade after KeyBanc (KEY) upgraded the company to "buy" from "hold" with a price target of $32.
"The recent underperformance in Diamond Foods stock price, elimination of the "tail-risk" associated with the company and an emerging inflection in their Snacks segment growth are the main drivers behind our upgrade of the stock. We acknowledge that the company's nut business is still a long way away from a successful turnaround; however, we think the stock works despite this," the firm said in a note.
Separately, TheStreet Ratings team rates DIAMOND FOODS INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DIAMOND FOODS INC (DMND) a SELL. This is driven by a number of negative factors, 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, poor profit margins and weak operating cash flow."
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 Food Products industry. The net income has significantly decreased by 577.9% when compared to the same quarter one year ago, falling from -$15.58 million to -$105.63 million.
- The debt-to-equity ratio is very high at 2.26 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, DMND has a quick ratio of 0.55, this demonstrates the lack of ability of the company to cover short-term liquidity 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 Food Products industry and the overall market, DIAMOND FOODS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for DIAMOND FOODS INC is currently lower than what is desirable, coming in at 27.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -55.33% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$163.68 million or 931.91% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: DMND Ratings Report