NEW YORK (
) has been upgraded by TheStreet Ratings from hold to buy. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the ratings report include:
- Currently the debt-to-equity ratio of 1.99 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, PCH's quick ratio is somewhat strong at 1.18, demonstrating the ability to handle short-term liquidity needs.
- In its most recent trading session, PCH has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, POTLATCH CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- PCH, with its decline in revenue, underperformed when compared the industry average of 7.3%. Since the same quarter one year prior, revenues fell by 12.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- POTLATCH CORP's earnings per share declined by 27.6% 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, POTLATCH CORP reported lower earnings of $0.99 versus $2.03 in the prior year. This year, the market expects an improvement in earnings ($1.18 versus $0.99).
Potlatch Corporation operates as a real estate investment trust (REIT) that owns and manages timberlands located in Arkansas, Idaho, Minnesota and Wisconsin in the United States. The company has a P/E ratio of 30.5, equal to the average real estate industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Potlatch has a market cap of $1.4 billion and is part of the
industry. Shares are up 7.4% year to date as of the close of trading on Tuesday.
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