NEW YORK (TheStreet) -- Shares of DryShips (DRYS) - Get DryShips Inc. Report rose 3.57% to $1.60 in afternoon trading Tuesday after Imperial Capital upgraded the stock two levels to "outperform" from "underperform" and increased its price target to $1.90 from $1.40.
The firm cited reduced concerns about the company's balance sheet after DryShips' equity raise.
Last week, the shipping company announced it would offer 250 million shares of common stock in a public offering at $1.40 a share. As part of the offering, chairman, president, and CEO George Economou bought $80 million in common stock, or a total of 57,142,857 shares at the offering price.
DryShips also announced its intention to use the net proceeds from the offering to repurchase part of its $700 million principal amount of debt under its 5% convertible senior notes that will mature on Dec. 1, 2014.
Separately, TheStreet Ratings team rates DRYSHIPS INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate DRYSHIPS INC (DRYS) 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 robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DRYS's very impressive revenue growth greatly exceeded the industry average of 10.7%. Since the same quarter one year prior, revenues leaped by 57.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- DRYSHIPS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DRYSHIPS INC continued to lose money by earning -$0.58 versus -$0.64 in the prior year. This year, the market expects an improvement in earnings ($0.04 versus -$0.58).
- The gross profit margin for DRYSHIPS INC is rather high; currently it is at 53.88%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.06% is in-line with the industry average.
- DRYS'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 31.51%, 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 debt-to-equity ratio is very high at 2.23 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 0.44, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full analysis from the report here: DRYS Ratings Report