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Why Turquoise Hill (TRQ) Stock Is Down Today

Stocks in this article: TRQ

NEW YORK (TheStreet) -- Turquoise Hill (TRQ) stock is falling on Thursday on news the company has filed a notice of dispute with the Mongolian government pertaining to a recent audit report claiming unpaid taxes. 

"Turquoise Hill is of the firm view that Oyu Tolgoi LLC has paid all taxes and charges as required under the Investment Agreement and Mongolian law and strongly disagrees with the claims in the audit report," the company said in a statement. 

By midafternoon, shares had tumbled 5% to $3.24. Trading volume of 6.1 million shares was double its three-month daily average. 

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Separately, TheStreet Ratings team rates TURQUOISE HILL RESOURCES LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate TURQUOISE HILL RESOURCES LTD (TRQ) a SELL. This is driven by some concerns, 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 poor profit margins, 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 gross profit margin for TURQUOISE HILL RESOURCES LTD is rather low; currently it is at 20.81%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, TRQ's net profit margin of -44.68% significantly underperformed when compared to the industry average.
  • Net operating cash flow has decreased to -$148.22 million or 25.57% when compared to the same quarter last year. Despite a decrease in cash flow TURQUOISE HILL RESOURCES LTD is still fairing well by exceeding its industry average cash flow growth rate of -37.47%.
  • TRQ's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.54%, which is also worse than the performance of the S&P 500 Index. 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.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income increased by 0.6% when compared to the same quarter one year prior, going from -$50.86 million to -$50.56 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, TURQUOISE HILL RESOURCES LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
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