NEW YORK (
) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally weak debt management, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.
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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 57.7% when compared to the same quarter one year ago, falling from $38.30 million to $16.20 million.
- The debt-to-equity ratio is very high at 3.47 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, NOR maintains a poor quick ratio of 0.89, which illustrates the inability to avoid short-term cash problems.
- The gross profit margin for NORANDA ALUMINUM HOLDING CP is rather low; currently it is at 20.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.60% significantly trails the industry average.
- Net operating cash flow has significantly decreased to -$16.40 million or 177.72% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 50.64%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 57.14% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
Noranda Aluminum Holding Corporation engages in the production and sale of primary aluminum products and rolled aluminum coils in the United States. It mines, produces, and sells bauxite used for alumina production. The company has a P/E ratio of 3.9, equal to the average metals & mining industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Noranda Aluminum has a market cap of $453.9 million and is part of the
industry. Shares are down 18.4% year to date as of the close of trading on Tuesday.
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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.