NEW YORK (TheStreet) -- Mercer International (MERC) - Get Report was gaining 7.3% to $7.67 Friday after pricing its 7 million share public offering.

The company announced that it will price the 7 million share public offering at $7.15 a share. The paper producer also gave the underwriters an option to buy up to an additional 1,050,000 shares of common stock to cover over-allotments.

The company estimates it will see net proceeds of about $46.5 million from the offering, or $53.6 million if underwriters exercise their option.

Mercer will use about $13.5 million of the net proceeds to provide its Stendal mill with greater operational and financial flexibility. The rest will be used for targeted capital expenditures including expansion of the company's wood procurement and logistics operations in Germany and as general working capital.

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TheStreet Ratings team rates MERCER INTL INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate MERCER INTL INC (MERC) a SELL. This is driven by several weaknesses, 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 deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Paper & Forest Products industry. The net income has significantly decreased by 33.3% when compared to the same quarter one year ago, falling from -$7.04 million to -$9.38 million.
  • 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 Paper & Forest Products industry and the overall market, MERCER INTL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for MERCER INTL INC is rather low; currently it is at 15.73%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.59% trails that of the industry average.
  • Net operating cash flow has decreased to -$24.79 million or 25.46% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 2.73 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, MERC has managed to keep a strong quick ratio of 1.71, which demonstrates the ability to cover short-term cash needs.
  • You can view the full analysis from the report here: MERC Ratings Report

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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.