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NEW YORK (TheStreet) -- Shares of Orchids Paper Products Co. (TIS) - Get Orchids Paper Products Company Report are down by 7.30% to $23.23 in late morning trading on Monday after the tissue paper products manufacturer announced the commencement of a proposed underwritten public offering of 1.5 million shares of its common stock.

Jefferies LLC will act as sole book-running manager for the offering. Oppenheimer and Craig-Hallum Capital will act as co-managers.

Orchids has granted underwriters a 30-day option to buy up to an additional 225,000 shares of common stock.

The company is planning to use the net proceeds from the offering along with bank financing and cash on hand to construct and operate a paper mill in Barnwell, SC. This facility will house a new paper machine and converting equipment intended to convert the parent rolls into finished product, as well as provide warehouse space for completed products and raw materials.

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TheStreet Recommends

Separately, TheStreet Ratings team rates ORCHIDS PAPER PRODUCTS as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ORCHIDS PAPER PRODUCTS (TIS) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 4.9%. Since the same quarter one year prior, revenues rose by 34.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that TIS's debt-to-equity ratio is low, the quick ratio, which is currently 0.70, displays a potential problem in covering short-term cash needs.
  • ORCHIDS PAPER PRODUCTS's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, ORCHIDS PAPER PRODUCTS reported lower earnings of $1.11 versus $1.67 in the prior year. This year, the market expects an improvement in earnings ($1.84 versus $1.11).
  • The change in net income from the same quarter one year ago has exceeded that of the Household Products industry average, but is less than that of the S&P 500. The net income has significantly decreased by 27.2% when compared to the same quarter one year ago, falling from $3.36 million to $2.45 million.
  • The share price of ORCHIDS PAPER PRODUCTS has not done very well: it is down 15.21% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
  • You can view the full analysis from the report here: TIS Ratings Report