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) -- Walter Energy (NYSE: WLT) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and poor profit margins.
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- The debt-to-equity ratio is very high at 2.06 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, WLT has a quick ratio of 0.63, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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 Metals & Mining industry and the overall market, WALTER ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for WALTER ENERGY INC is rather low; currently it is at 18.00%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -173.50% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $24.44 million or 89.38% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- WALTER ENERGY 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, WALTER ENERGY INC reported lower earnings of $6.09 versus $7.27 in the prior year. For the next year, the market is expecting a contraction of 80.5% in earnings ($1.19 versus $6.09).
-- Written by a member of TheStreet Ratings Staff