Dow Chemical Co Stock Buy Recommendation Reiterated (DOW)

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) -- Dow Chemical (NYSE: DOW) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass

Highlights from the ratings report include:
  • DOW, with its decline in revenue, slightly underperformed the industry average of 0.6%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • DOW CHEMICAL 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. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, DOW CHEMICAL reported lower earnings of $0.71 versus $2.05 in the prior year. This year, the market expects an improvement in earnings ($2.37 versus $0.71).
  • The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, DOW's quick ratio is somewhat strong at 1.22, demonstrating the ability to handle short-term liquidity needs.
  • 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. In comparison to the other companies in the Chemicals industry and the overall market, DOW CHEMICAL's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for DOW CHEMICAL is currently extremely low, coming in at 13.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.53% is significantly below that of the industry average.

The Dow Chemical Company manufactures and supplies chemical products used as raw materials in the manufacture of customer products and services worldwide. Dow Chemical has a market cap of $39.29 billion and is part of the basic materials sector and chemicals industry. The company has a P/E ratio of 17.2, below the S&P 500 P/E ratio of 17.7. Shares are up 1.3% year to date as of the close of trading on Wednesday.

You can view the full Dow Chemical Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

It's Official: Action Alerts PLUS beats the S&P 500 with Dividends Reinvested! Cramer and Link were up 16.72% in 2012. Were you? See what they are trading for 14-days FREE

null

More from Markets

Global Stocks Ease as Investors Focus on Dollar, Oil, Italy After US-China Truce

Global Stocks Ease as Investors Focus on Dollar, Oil, Italy After US-China Truce

Replay: Jim Cramer on Tariffs, the Market Rally, Caterpillar and Micron

Replay: Jim Cramer on Tariffs, the Market Rally, Caterpillar and Micron

Video: When Planning for Retirement, Don't Underestimate Your Life Span

Video: When Planning for Retirement, Don't Underestimate Your Life Span

Video: Here's What May Come Next for Theranos Founder and CEO Elizabeth Holmes

Video: Here's What May Come Next for Theranos Founder and CEO Elizabeth Holmes

Charlie Gasparino Says GE Is Reportedly Looking to Slash Its Dividend Again

Charlie Gasparino Says GE Is Reportedly Looking to Slash Its Dividend Again