NEW YORK (TheStreet) -- BioFuel Energy (BIOF) hit a one-year high of $8.64 on Monday but then plunged after two studies revealed results that called the industry into question as a viable way to combat climate change.
A University of Nebraska-Lincoln study found that corn stover, or the leftovers after corn is harvested, might actually be worse than gasoline in terms of carbon emissions. The Intergovernmental Panel on Climate Change (IPCC), the United Nations' environmental agency, also reported that raising crops to use for fuel could endanger ecosystems, biodiversity and water supplies.
BioFuel dropped 7.38% to $7.15 at 3:44 p.m. More than 2.1 million shares had changed hands, which more than doubled the average volume of 1,042,570.
Separately, TheStreet Ratings team rates BIOFUEL ENERGY CORP as a "sell" with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate BIOFUEL ENERGY CORP (BIOF) a SELL. This is driven by some concerns, 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 and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 3.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.13, which clearly demonstrates the inability to cover short-term cash 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 Oil, Gas & Consumable Fuels industry and the overall market, BIOFUEL ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for BIOFUEL ENERGY CORP is currently extremely low, coming in at 4.42%. Regardless of BIOF's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, BIOF's net profit margin of -5.64% significantly underperformed when compared to the industry average.
- BIOFUEL ENERGY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BIOFUEL ENERGY CORP reported poor results of -$7.62 versus -$2.60 in the prior year.
- BIOF, with its decline in revenue, underperformed when compared the industry average of 7.6%. Since the same quarter one year prior, revenues fell by 31.9%. 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: BIOF Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.