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 (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
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Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 21.8%. Since the same quarter one year prior, revenues rose by 14.8%. 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.
- GSM's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GSM has a quick ratio of 1.91, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has increased to $15.92 million or 28.77% when compared to the same quarter last year. Despite an increase in cash flow, GLOBE SPECIALTY METALS INC's cash flow growth rate is still lower than the industry average growth rate of 40.93%.
- 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. When compared to other companies in the Metals & Mining industry and the overall market, GLOBE SPECIALTY METALS INC's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for GLOBE SPECIALTY METALS INC is rather low; currently it is at 21.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.80% is significantly below that of the industry average.
Globe Specialty Metals, Inc., together with its subsidiaries, produces and sells silicon metal and silicon-based alloys primarily in North America, Europe, South America, and Asia. The company has a P/E ratio of 39, above the S&P 500 P/E ratio of 17.7. Globe Specialty has a market cap of $1.05 billion and is part of the basic materials sector and metals & mining industry. Shares are up 4.9% year to date as of the close of trading on Friday.
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