NEW YORK (TheStreet) -- MBIA (MBI) - Get Report shares are down 18.84% to $5.17 in morning trading on Tuesday, continuing to suffer the fallout from Puerto Rico's admission that it will not be able to pay off its $72 billion in debt.
Puerto Rico Governor Alejandro Garcia Padilla told the New York Times Friday that the country was unable to pay off its debts and as of March 31 MBIA held about $4.5 billion of par exposure to the U.S. territory, according to Bloomberg.
Yesterday a newly appointed adviser to the territory, who also was the judge that oversaw Detroit's bankruptcy proceedings, said that the island was insolvent and would soon run out of cash, according to Reuters.
"It can no longer pay its debts, it will soon run out of cash to operate, its residents and businesses will suffer," said retired U.S. Bankruptcy Court judge Steven Rhodes.
TheStreet Ratings team rates MBIA INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate MBIA INC (MBI) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 97.87% to -$9.00 million when compared to the same quarter last year. In addition, MBIA INC has also vastly surpassed the industry average cash flow growth rate of 21.94%.
- The gross profit margin for MBIA INC is currently very high, coming in at 79.00%. Regardless of MBI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MBI's net profit margin of 31.50% significantly outperformed against the industry.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, MBIA INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- 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 Insurance industry. The net income has significantly decreased by 73.0% when compared to the same quarter one year ago, falling from $256.00 million to $69.00 million.
- The debt-to-equity ratio is very high at 2.26 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full analysis from the report here: MBI Ratings Report