Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link
NEW YORK (
-- A M Castle
) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.
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Highlights from the ratings report include:
- 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 Metals & Mining industry. The net income has significantly decreased by 50.6% when compared to the same quarter one year ago, falling from -$10.62 million to -$16.00 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Metals & Mining industry and the overall market, CASTLE (A M) & CO's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$2.87 million or 108.80% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The gross profit margin for CASTLE (A M) & CO is currently lower than what is desirable, coming in at 25.60%. Regardless of CAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CAS's net profit margin of -6.31% significantly underperformed when compared to the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.82%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 50.00% 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.
A. M. Castle & Co., together with its subsidiaries, operates as a specialty metals and plastics distribution company. The company operates through two segments, Metals and Plastics. A M Castle has a market cap of $260.4 million and is part of the industrial goods sector and industrial industry. Shares are down 23.6% year to date as of the close of trading on Thursday.
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