Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model
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, 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 180.6% when compared to the same quarter one year ago, falling from $3.70 million to -$2.98 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.
- The gross profit margin for CASTLE (A M) & CO is rather low; currently it is at 15.30%. 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 -0.90% 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 29.10%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 181.25% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- CAS's debt-to-equity ratio of 0.86 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.91 is weak.
A.M. Castle & Co., together with its subsidiaries, engages in the distribution of specialty metals and plastics worldwide. The company operates in two segments, Metals and Plastics. A.M. Castle has a market cap of $202.7 million and is part of the
industry. Shares are down 7.5% year to date as of the close of trading on Wednesday.
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-- Written by a member of TheStreet Ratings Staff