Editor's Note: 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.
NEW YORK (
) has been reiterated by TheStreet Ratings as a hold with a ratings score of C . The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 21.8%. Since the same quarter one year prior, revenues slightly increased by 6.5%. 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.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, VALE has a quick ratio of 1.65, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for VALE SA is rather high; currently it is at 52.10%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 15.10% trails the industry average.
- VALE SA's earnings per share declined by 22.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, VALE SA increased its bottom line by earning $3.87 versus $3.43 in the prior year. For the next year, the market is expecting a contraction of 44.4% in earnings ($2.15 versus $3.87).
- Looking at the price performance of VALE's shares over the past 12 months, there is not much good news to report: the stock is down 29.12%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
Vale S.A. engages in the exploration, production, and sale of basic metals in Brazil and internationally. The company is also involved in energy, logistics, and steel businesses. Vale has a market cap of $123.19 billion and is part of the basic materials sector and metals & mining industry. The company has a P/E ratio of 4, below the S&P 500 P/E ratio of 17.7. Shares are down 19.3% year to date as of the close of trading on Wednesday.
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--Written by a member of TheStreet Ratings Staff.
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