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"We rate RENTECH NITROGEN PARTNERS LP (RNF) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 62.14 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, RNF has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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 Chemicals industry and the overall market, RENTECH NITROGEN PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for RENTECH NITROGEN PARTNERS LP is rather low; currently it is at 17.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.68% is significantly below that of the industry average.
- RNF's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 37.30%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- RNF, with its decline in revenue, slightly underperformed the industry average of 5.8%. Since the same quarter one year prior, revenues slightly dropped by 9.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: RNF Ratings Report
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