NEW YORK (TheStreet) -- Dominion Diamond Corp. (DDC) stock is gaining by 21.78% to $10.01 in mid-afternoon trading on Tuesday as the company considers the possibility of a sale, following pressure from shareholders about its declining share price.
The Canadian diamond miner has hired Rothschild & Co. to direct them on a potential sales process, Bloomberg reports, but the talks aren't final and might not lead to a deal.
A group of shareholders led by K2 & Associated Investment Management, a Toronto-based hedge fund, requested a meeting with Dominion Diamond to discuss a strategic review of the company. On Monday, the hedge fund sent a letter to the company's board criticizing its management and business strategy.
The company is looking "forward to an open dialogue" with the group of shareholders, Dominion said in a statement this morning.
Dominion Diamond's shares rose the most since 2009 today, Bloomberg noted.
About 1.24 million of the company's shares have been traded this afternoon, well over its average volume of 584,285 shares per day.
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate DOMINION DIAMOND CORP as a Hold with a ratings score of C-. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DDC's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, DDC has a quick ratio of 1.91, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has slightly increased to $60.88 million or 3.16% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -28.10%.
- 39.67% is the gross profit margin for DOMINION DIAMOND CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 54.87%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 83.33% compared to 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.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, DOMINION DIAMOND CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full analysis from the report here: DDC