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 largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
Highlights from the ratings report include:
- UMC's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, UMC has a quick ratio of 1.64, which demonstrates the ability of the company to cover short-term liquidity needs.
- 42.80% is the gross profit margin for UNITED MICROELECTRONICS CORP which we consider to be strong. Regardless of UMC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, UMC's net profit margin of 3.90% is significantly lower than the same period one year prior.
- Net operating cash flow has decreased to $358.96 million or 41.09% 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.
- 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 Semiconductors & Semiconductor Equipment industry and the overall market, UNITED MICROELECTRONICS CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
United Microelectronics Corporation operates as a semiconductor wafer foundry in Taiwan, Japan, Singapore, North America, and Europe. The company provides wafer fabrication services and other solutions that are designed to address the needs of foundry customers. The company has a P/E ratio of 13.9, below the average electronics industry P/E ratio of 15.6 and below the S&P 500 P/E ratio of 17.7. United Microelectronics has a market cap of $5.25 billion and is part of the
industry. Shares are down 7% year to date as of the close of trading on Tuesday.
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-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.