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) -- Gerdau (NYSE: GGB) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and a generally disappointing performance in the stock itself.
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- GGB's very impressive revenue growth greatly exceeded the industry average of 20.6%. Since the same quarter one year prior, revenues leaped by 52.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.55, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.01 is sturdy.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Metals & Mining industry and the overall market, GERDAU SA's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for GERDAU SA is rather low; currently it is at 16.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.90% significantly trails the industry average.
-- Written by a member of TheStreet Ratings Staff