NEW YORK (
-- OM Group
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust 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 disappointing return on equity, a generally disappointing performance in the stock itself and poor profit margins.
Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 2.8%. Since the same quarter one year prior, revenues rose by 49.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.33, which illustrates the ability to avoid short-term cash problems.
- OM GROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, OM GROUP INC reported lower earnings of $1.22 versus $2.70 in the prior year. This year, the market expects an improvement in earnings ($2.95 versus $1.22).
- OMG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 33.45%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Chemicals industry and the overall market, OM GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
OM Group, Inc. operates as a diversified specialty chemicals and materials company worldwide. The company operates in four segments: Magnetic Technologies, Advanced Materials, Specialty Chemicals, and Battery Technologies. The company has a P/E ratio of 20, equal to the average chemicals industry P/E ratio and above the S&P 500 P/E ratio of 17.7. OM Group has a market cap of $782.5 million and is part of the
industry. Shares are up 7.7% year to date as of the close of trading on Tuesday.
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-- Written by a member of TheStreet Ratings Staff