Origin Agritech received a non-binding proposal letter dated May 12, 2014, from Hunan Xindaxin. In the letter, Xindaxin proposes to acquire the company for $2.50 a share.
Origin Agritech said it is reviewing and evaluating the proposal, but says it has not yet made any decisions.
TheStreet Ratings team rates ORIGIN AGRITECH LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate ORIGIN AGRITECH LTD (SEED) a SELL. This is driven by a few notable 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, generally high debt management risk and disappointing return on equity."
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 Food Products industry. The net income has significantly decreased by 55.8% when compared to the same quarter one year ago, falling from -$4.49 million to -$7.00 million.
- Currently the debt-to-equity ratio of 1.77 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.08, 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 Food Products industry and the overall market, ORIGIN AGRITECH LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- SEED, with its very weak revenue results, has greatly underperformed against the industry average of 2.6%. Since the same quarter one year prior, revenues plummeted by 85.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ORIGIN AGRITECH LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, ORIGIN AGRITECH LTD turned its bottom line around by earning $0.05 versus -$0.02 in the prior year.
- You can view the full analysis from the report here: SEED 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.