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NEW YORK (
) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself.
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Highlights from the ratings report include:
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 441.8% when compared to the same quarter one year ago, falling from $4.27 million to -$14.59 million.
- The gross profit margin for RENTECH INC is rather low; currently it is at 23.08%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -12.60% is significantly below that of the industry average.
- Net operating cash flow has decreased to $28.54 million or 46.18% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The debt-to-equity ratio is very high at 2.48 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, RTK has managed to keep a strong quick ratio of 1.81, which demonstrates the ability to cover short-term cash needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 33.56%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 400.00% compared to the year-earlier 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.
Rentech, Inc., through its subsidiaries, engages in the manufacture and sale of natural-gas based nitrogen fertilizer products in the United States and Brazil. Rentech has a market cap of $462.7 million and is part of the basic materials sector and chemicals industry. Shares are up 13.1% year to date as of the close of trading on Thursday.
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