Vale SA Stock Hold Recommendation Reiterated (VALE)

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) -- Vale (NYSE: VALE) has been reiterated by TheStreet Ratings as a hold with a ratings score of C+ . The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and disappointing return on equity.

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Highlights from the ratings report include:
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.6%. Since the same quarter one year prior, revenues slightly dropped by 3.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.43, 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 1.22 is sturdy.
  • Net operating cash flow has significantly decreased to $3,075.47 million or 58.15% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • 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 Metals & Mining industry. The net income has significantly decreased by 164.7% when compared to the same quarter one year ago, falling from $4,363.78 million to -$2,822.29 million.

Vale S.A. engages in the research, production, and marketing of iron ore and pellets, nickel, fertilizers, copper, coal, manganese, ferroalloys, cobalt, platinum group metals, and precious metals in Brazil and internationally. Vale has a market cap of $95.9 billion and is part of the basic materials sector and metals & mining industry. The company has a P/E ratio of 4.3, below the S&P 500 P/E ratio of 17.7. Shares are down 15.1% year to date as of the close of trading on Wednesday.

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

--Written by a member of TheStreet Ratings Staff.

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