NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.
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 43.9% when compared to the same quarter one year ago, falling from $432.31 million to $242.58 million.
- Net operating cash flow has decreased to $569.10 million or 24.29% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- GERDAU SA's earnings per share declined by 46.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GERDAU SA increased its bottom line by earning $0.90 versus $0.45 in the prior year. This year, the market expects an improvement in earnings ($1.96 versus $0.90).
- Despite its growing revenue, the company underperformed as compared with the industry average of 32.6%. Since the same quarter one year prior, revenues rose by 28.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
Gerdau S.A. engages in the production and sale of steel products in Brazil and internationally. The company has a P/E ratio of 10.3, below the average metals & mining industry P/E ratio of 13.8 and below the S&P 500 P/E ratio of 16.1. Gerdau has a market cap of $17.7 billion and is part of the
industry. Shares are down 11.9% year to date as of the close of trading on Tuesday.
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