NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and poor profit margins.
Highlights from the ratings report include:
- SCHN's revenue growth trails the industry average of 49.8%. Since the same quarter one year prior, revenues rose by 39.4%. 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.
- SCHNITZER STEEL INDS's earnings per share declined by 18.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SCHNITZER STEEL INDS turned its bottom line around by earning $2.86 versus -$0.99 in the prior year. This year, the market expects an improvement in earnings ($4.12 versus $2.86).
- Net operating cash flow has significantly decreased to -$7.60 million or 131.58% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, SCHN has underperformed the S&P 500 Index, declining 16.12% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
Schnitzer Steel Industries, Inc. engages in recycling ferrous and nonferrous scrap metals, and used and salvaged vehicles; and manufacturing finished steel products. The company has a P/E ratio of 11.7, above the average metals & mining industry P/E ratio of 11.5 and below the S&P 500 P/E ratio of 17.7. Schnitzer has a market cap of $997.1 million and is part of the
industry. Shares are down 40.3% year to date as of the close of trading on Monday.
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