NEW YORK ( TheStreet) -- Sappi (NYSE: SPP) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Paper & Forest Products industry average. The net income increased by 21.6% when compared to the same quarter one year prior, going from $37.00 million to $45.00 million.
- Net operating cash flow has significantly increased by 74.19% to -$40.00 million when compared to the same quarter last year. In addition, SAPPI LTD has also vastly surpassed the industry average cash flow growth rate of -36.15%.
- SAPPI LTD has improved earnings per share by 28.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SAPPI LTD swung to a loss, reporting -$0.44 versus $0.12 in the prior year. This year, the market expects an improvement in earnings ($0.17 versus -$0.44).
- Currently the debt-to-equity ratio of 1.70 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Paper & Forest Products industry and the overall market, SAPPI LTD's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet RatingsStaff