NEW YORK (
-- OM Group
) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
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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 Chemicals industry. The net income has significantly decreased by 190.7% when compared to the same quarter one year ago, falling from $24.62 million to -$22.34 million.
- 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 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.
- The gross profit margin for OM GROUP INC is currently lower than what is desirable, coming in at 30.30%. Regardless of OMG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, OMG's net profit margin of -5.10% significantly underperformed when compared to the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.25%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 188.75% 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.
- OM GROUP INC 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse 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 ($2.44 versus $1.22).
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 30, above the average chemicals industry P/E ratio of 28.1 and above the S&P 500 P/E ratio of 17.7. OM Group has a market cap of $572.7 million and is part of the
industry. Shares are down 21% 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.