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"We rate OM GROUP INC (OMG) 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 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 deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- OMG's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.00, which illustrates the ability to avoid short-term cash problems.
- OMG, with its decline in revenue, slightly underperformed the industry average of 4.6%. Since the same quarter one year prior, revenues slightly dropped by 9.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 26.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -76.98% is significantly below that of the industry average.
- You can view the full analysis from the report here: OMG Ratings Report