NEW YORK ( TheStreet) -- Companhia Siderurgica Nacional (NYSE: SID) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, robust revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally poor debt management. Highlights from the ratings report include:
- SID's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 36.12%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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 debt-to-equity ratio is very high at 2.64 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, SID has managed to keep a strong quick ratio of 2.37, which demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 124.00% to $563.45 million when compared to the same quarter last year. Despite an increase in cash flow of 124.00%, COMPANHIA SIDERURGICA NACION is still growing at a significantly lower rate than the industry average of 218.05%.
- SID's revenue growth trails the industry average of 46.5%. Since the same quarter one year prior, revenues rose by 30.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- COMPANHIA SIDERURGICA NACION has improved earnings per share by 35.1% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, COMPANHIA SIDERURGICA NACION increased its bottom line by earning $1.04 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $1.04).