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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link

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NEW YORK (

TheStreet

)

-- POSCO

(NYSE:

PKX

) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

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Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 1.5%. 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.
  • POSCO has experienced 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, POSCO reported lower earnings of $4.16 versus $7.49 in the prior year. This year, the market expects an improvement in earnings ($5.39 versus $4.16).
  • The share price of POSCO has not done very well: it is down 15.90% 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. 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.
  • 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 Metals & Mining industry. The net income has significantly decreased by 55.3% when compared to the same quarter one year ago, falling from $633.09 million to $283.13 million.

POSCO, together with its subsidiaries, primarily manufactures and sells integrated steel products in South Korea. It operates through four segments: Steel, Trading, Construction, and Others. The company has a P/E ratio of 5.6, below the S&P 500 P/E ratio of 17.7. POSCO has a market cap of $22.02 billion and is part of the basic materials sector and metals & mining industry. Shares are down 12.2% year to date as of the close of trading on Thursday.

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POSCO Ratings Report

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.