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TheStreet Open House

Why DryShips (DRYS) Stock Is Down Today

NEW YORK (TheStreet) -- DryShips (DRYS) was falling -2.2% to $3.19 Wednesday after cancelling four newbuilding contracts with China-based Jiangsu Rongsheng Heavy Industries.

DryShips subsidiary Ocean Rig UDW (ORIG) reached an agreement with Jiangshu Rongsheng Heavy Industries to cancel the newbuilding contracts for four ice-class panama bulker vessels. Under the agreement the company received refunds for all installments paid toward the vessels plus interest.

The company paid $11.5 million for the vessels before cancelling the contracts. DryShips already received all refunds due under the agreement.

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TheStreet Ratings team rates DRYSHIPS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate DRYSHIPS INC (DRYS) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

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

  • DRYS's very impressive revenue growth greatly exceeded the industry average of 9.5%. Since the same quarter one year prior, revenues leaped by 57.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Powered by its strong earnings growth of 80.00% and other important driving factors, this stock has surged by 32.65% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The gross profit margin for DRYSHIPS INC is rather high; currently it is at 53.88%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.06% is in-line with the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Marine industry and the overall market, DRYSHIPS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 2.23 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.44, which clearly demonstrates the inability to cover short-term cash needs.
  • You can view the full analysis from the report here: DRYS Ratings Report

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