NEW YORK ( TheStreet) -- Sappi (NYSE: SPP) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally weak debt management, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The share price of SAPPI LTD has not done very well: it is down 21.17% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has decreased to $45.00 million or 30.76% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The gross profit margin for SAPPI LTD is currently extremely low, coming in at 14.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.80% trails that of the industry average.
  • Currently the debt-to-equity ratio of 1.51 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated.
  • 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 206.3% when compared to the same quarter one year ago, falling from $64.00 million to -$68.00 million.

Sappi Limited manufactures and sells various pulp, paper, chemical cellulose, and wood products worldwide. The company has a P/E ratio of 14.4, below the average consumer non-durables industry P/E ratio of 20.6 and below the S&P 500 P/E ratio of 17.7. Sappi has a market cap of $2.2 billion and is part of the consumer goods sector and consumer non-durables industry. Shares are down 26.2% year to date as of the close of trading on Friday.

You can view the full Sappi Ratings Report or get investment ideas from our investment research center.
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