Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. NEW YORK ( TheStreet) -- Mercer International (Nasdaq: MERC) has been upgraded by TheStreet Ratings from sell to hold. Among the primary strengths of the company is its solid stock performance, considering both the consistency and magnitude of the price movement over time. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.
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- The revenue fell significantly faster than the industry average of 8.1%. Since the same quarter one year prior, revenues fell by 29.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The debt-to-equity ratio is very high at 2.39 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, MERC has managed to keep a strong quick ratio of 1.74, which demonstrates the ability to cover short-term cash needs.
- MERCER INTL INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, MERCER INTL INC reported lower earnings of $1.16 versus $1.93 in the prior year. For the next year, the market is expecting a contraction of 104.3% in earnings (-$0.05 versus $1.16).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Paper & Forest Products industry. The net income has significantly decreased by 91.6% when compared to the same quarter one year ago, falling from $21.88 million to $1.84 million.
-- Written by a member of TheStreet Ratings Staff