NEW YORK (TheStreet) -- Shares of Popular Inc. (BPOP) - Get Report, a financial holding company, were falling 8.9% to $30.01 on heavy trading volume Monday, after Puerto Rico Governor Alejandro García Padilla's comments that the commonwealth cannot pay its debts.
The commonwealth currently has about $72 billion in debt, according to The New York Times. The governor and member of his staff said the commonwealth would likely seek significant concessions from its creditors which could include deferring debt payments for as many as five years or extending the repayment timetable.
"The debt is not payable," García Padilla told the Times. "There is no other option. I would love to have an easier option. This is not politics, this is math."
The governor's comments brought down shares of Puerto Rican banks such as Popular.
About 1.5 million shares of Popular were traded by 10:46 a.m. Monday, above the company's average trading volume of about 824,000 shares a day.
TheStreet Ratings team rates POPULAR INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate POPULAR INC (BPOP) 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 expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for POPULAR INC is currently very high, coming in at 82.80%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, BPOP's net profit margin of 14.80% significantly trails the industry average.
- POPULAR INC has improved earnings per share by 10.9% 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, POPULAR INC swung to a loss, reporting -$1.88 versus $5.49 in the prior year. This year, the market expects an improvement in earnings ($3.37 versus -$1.88).
- BPOP, with its decline in revenue, slightly underperformed the industry average of 0.0%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Net operating cash flow has significantly decreased to -$9.83 million or 106.14% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Commercial Banks industry and the overall market, POPULAR INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: BPOP Ratings Report