NEW YORK ( TheStreet) -- China Gerui Advanced Materials Group (Nasdaq: CHOP) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 Metals & Mining industry and the overall market, CHINA GERUI ADV MATERIALS GP's return on equity exceeds that of both the industry average and the S&P 500.
- CHINA GERUI ADV MATERIALS GP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CHINA GERUI ADV MATERIALS GP reported lower earnings of $0.99 versus $1.15 in the prior year. This year, the market expects an improvement in earnings ($1.12 versus $0.99).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.96%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 68.00% 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 gross profit margin for CHINA GERUI ADV MATERIALS GP is currently lower than what is desirable, coming in at 30.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.40% significantly trails the industry average.
- 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 Metals & Mining industry. The net income has significantly decreased by 65.3% when compared to the same quarter one year ago, falling from $11.53 million to $4.00 million.