Rating Change #5

Dow Chemical ( DOW) 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 revenue growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • DOW CHEMICAL 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, DOW CHEMICAL increased its bottom line by earning $1.73 versus $0.16 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $1.73).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 63.9% when compared to the same quarter one year prior, rising from $651.00 million to $1,067.00 million.
  • DOW's debt-to-equity ratio of 0.83 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.04 is sturdy.
  • The gross profit margin for DOW CHEMICAL is rather low; currently it is at 19.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.60% trails that of the industry average.
  • Net operating cash flow has decreased to $798.00 million or 40.58% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

The Dow Chemical Company manufactures and supplies products used as raw materials in the production of customer products and services worldwide. The company has a P/E ratio of 10.9, equal to the average chemicals industry P/E ratio and below the S&P 500 P/E ratio of 17.7. The Dow Chemical has a market cap of $28.1 billion and is part of the basic materials sector and chemicals industry. Shares are down 30.4% year to date as of the close of trading on Friday.

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

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