NEW YORK (TheStreet) -- Rentech (RTK) shares are up 6.35% to $1.34 in trading on Tuesday after the company announced that GSO Capital Partners (BGX) - Get Report increased its credit facility for the clean energy solutions provider by up to $63 million.
The credit investment arm of Blackstone (BX) - Get Report is expected to increase its partnership with proceeds from the new facility expected to fund the completion of Rentech's Canadian wood pellet projects.
The company estimates the cost of the projects to range between $125 million and $130 million.
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The new lending commitment is available for up to one year with the term loans set to mature April 9, 2019.
TheStreet Ratings team rates RENTECH INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate RENTECH INC (RTK) 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 2.07 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, RTK maintains a poor quick ratio of 0.74, which illustrates the inability to avoid short-term cash problems.
- 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 INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for RENTECH INC is rather low; currently it is at 17.63%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -8.28% is significantly below that of the industry average.
- RTK'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 31.08%, 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. 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 has improved earnings per share by 37.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, RENTECH INC turned its bottom line around by earning $0.01 versus -$0.06 in the prior year. For the next year, the market is expecting a contraction of 1500.0% in earnings (-$0.14 versus $0.01).
- You can view the full analysis from the report here: RTK Ratings Report