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) -- OM Group (NYSE: OMG) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 108.1% when compared to the same quarter one year prior, rising from -$68.25 million to $5.51 million.
- The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.43, which illustrates the ability to avoid short-term cash problems.
- OM GROUP INC reported significant earnings per share improvement 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, OM GROUP INC reported lower earnings of $1.22 versus $2.70 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.22).
- OMG'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 32.09%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for OM GROUP INC is currently lower than what is desirable, coming in at 30.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.40% trails that of the industry average.
-- Written by a member of TheStreet Ratings Staff