NEW YORK ( TheStreet) -- Metals USA Holdings (NYSE: MUSA) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins, generally disappointing historical performance in the stock itself and generally weak debt management.

Highlights from the ratings report include:
  • The gross profit margin for METALS USA HOLDINGS CORP is currently extremely low, coming in at 9.70%. Regardless of MUSA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, MUSA's net profit margin of 4.30% is significantly lower than the same period one year prior.
  • The debt-to-equity ratio is very high at 2.13 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, MUSA has managed to keep a strong quick ratio of 1.88, which demonstrates the ability to cover short-term cash needs.
  • MUSA has underperformed the S&P 500 Index, declining 6.46% from its price level of one year ago. 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.
  • METALS USA HOLDINGS CORP 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, METALS USA HOLDINGS CORP increased its bottom line by earning $0.31 versus $0.13 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $0.31).
  • 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 760.0% when compared to the same quarter one year prior, rising from $2.50 million to $21.50 million.

Metals USA Holdings Corp., through its subsidiaries, provides carbon steel, stainless steel, aluminum and specialty metals, and manufactured metal components in the United States and Canada. It operates in three segments: Plates and Shapes, Flat Rolled and Non-Ferrous, and Building Products. The company has a P/E ratio of 9.7, below the average metals & mining industry P/E ratio of 9.9 and below the S&P 500 P/E ratio of 17.7. Metals USA has a market cap of $418.8 million and is part of the basic materials sector and metals & mining industry. Shares are down 25.9% year to date as of the close of trading on Tuesday.

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