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 solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 24.6%. Since the same quarter one year prior, revenues rose by 20.3%. 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.
- GMK's debt-to-equity ratio of 0.99 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.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food Products industry and the overall market on the basis of return on equity, GRUMA SAB DE CV underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for GRUMA SAB DE CV is currently lower than what is desirable, coming in at 28.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.50% trails that of the industry average.
Gruma, S.A.B. de C.V., through its subsidiaries, engages in the production and sale of corn flour, wheat flour, tortillas, and other related products. The company has a P/E ratio of 59, above the average food & beverage industry P/E ratio of 3.3 and above the S&P 500 P/E ratio of 17.7. Gruma S.A.B. de C.V has a market cap of $1.25 billion and is part of the
industry. Shares are up 17.8% year to date as of the close of trading on Friday.
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-- Written by a member of TheStreet Ratings Staff
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.