NEW YORK ( TheStreet) -- China Gerui Advanced Materials Group (Nasdaq: CHOP) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and weak operating cash flow. Highlights from the ratings report include:
- CHOP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 50.54%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Net operating cash flow has decreased to $13.37 million or 23.62% when compared to the same quarter last year. Despite a decrease in cash flow CHINA GERUI ADV MATERIALS GP is still fairing well by exceeding its industry average cash flow growth rate of -46.25%.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Metals & Mining industry and the overall market, CHINA GERUI ADV MATERIALS GP's return on equity exceeds that of both the industry average and the S&P 500.
- CHOP'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 1.24 is sturdy.
- CHINA GERUI ADV MATERIALS GP has improved earnings per share by 34.8% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, CHINA GERUI ADV MATERIALS GP increased its bottom line by earning $1.00 versus $0.99 in the prior year. This year, the market expects an improvement in earnings ($1.27 versus $1.00).
-- Written by a member of TheStreet Ratings Staff