NEW YORK ( TheStreet) -- Globe Specialty Metals (Nasdaq: GSM) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and robust revenue growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- GLOBE SPECIALTY METALS INC 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, GLOBE SPECIALTY METALS INC increased its bottom line by earning $0.68 versus $0.47 in the prior year. This year, the market expects an improvement in earnings ($1.47 versus $0.68).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 135.2% when compared to the same quarter one year prior, rising from $6.61 million to $15.55 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, GLOBE SPECIALTY METALS INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Powered by its strong earnings growth of 122.22% and other important driving factors, this stock has surged by 36.41% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The gross profit margin for GLOBE SPECIALTY METALS INC is currently lower than what is desirable, coming in at 28.20%. Regardless of GSM's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, GSM's net profit margin of 8.80% is significantly lower than the same period one year prior.