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 (
-- Mechel OAO
) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and poor profit margins.
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Highlights from the ratings report include:
- The debt-to-equity ratio is very high at 2.22 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.20, which clearly demonstrates the inability to cover short-term cash needs.
- 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 Metals & Mining industry and the overall market, MECHEL OAO's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for MECHEL OAO is currently lower than what is desirable, coming in at 33.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -26.70% is significantly below that of the industry average.
- MECHEL OAO has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, MECHEL OAO reported lower earnings of $1.55 versus $1.56 in the prior year. For the next year, the market is expecting a contraction of 46.8% in earnings ($0.83 versus $1.55).
- 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 528.9% when compared to the same quarter one year ago, falling from $191.91 million to -$823.02 million.
Mechel OAO, together with its subsidiaries, operates as a mining and steel company primarily in the Russian Federation, other CIS countries, Europe, the Middle East, the United States, and rest of Asia. The company operates in four segments: Mining, Steel, Ferroalloys, and Power. The company has a P/E ratio of 4.4, equal to the average metals & mining industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Mechel OAO has a market cap of $2.87 billion and is part of the
industry. Shares are down 18.8% year to date as of the close of trading on Wednesday.
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-- Written by a member of TheStreet Ratings Staff
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