NEW YORK (TheStreet) -- Northstar Realty Finance (NRF) lost most of its Monday gains on Tuesday after the company announced it was not in talks with American Realty Capital Properties (ARCP) about a takeover.
Financial Times reporter Ed Hammond tweeted Monday morning that American Realty was in talks for a takeover of NorthStar at $20 a share. The news sent NorthStar shares to a five-year high of $17.93, but the stock had fallen off 6.89% to $16.01 at 11:43 a.m. on Tuesday.
NorthStar said in a statement it is focusing on its business strategies, including a spin-off of its asset management business, and that it does not rule out "discussions with interested parties."
TheStreet Ratings team rates NORTHSTAR REALTY FINANCE CP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate NORTHSTAR REALTY FINANCE CP (NRF) a HOLD. 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 solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 95.00% and other important driving factors, this stock has surged by 61.57% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- NORTHSTAR REALTY FINANCE CP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NORTHSTAR REALTY FINANCE CP continued to lose money by earning -$0.55 versus -$2.26 in the prior year. This year, the market expects an improvement in earnings ($1.14 versus -$0.55).
- The gross profit margin for NORTHSTAR REALTY FINANCE CP is rather high; currently it is at 61.26%. Regardless of NRF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NRF's net profit margin of 2.56% is significantly lower than the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NORTHSTAR REALTY FINANCE CP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: NRF 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.