Omnova Solutions Inc. Stock Downgraded (OMN)

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) -- Omnova Solutions (NYSE: OMN) has been downgraded by TheStreet Ratings from buy to hold. 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. At the same time, however, we also find weaknesses including unimpressive growth in net income, disappointing return on equity and poor profit margins.

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Highlights from the ratings report include:
  • OMNOVA SOLUTIONS 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. 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, OMNOVA SOLUTIONS INC increased its bottom line by earning $0.55 versus $0.36 in the prior year. This year, the market expects an improvement in earnings ($0.66 versus $0.55).
  • OMN, with its decline in revenue, underperformed when compared the industry average of 5.5%. Since the same quarter one year prior, revenues slightly dropped by 8.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • The gross profit margin for OMNOVA SOLUTIONS INC is rather low; currently it is at 19.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.07% is significantly below that of the industry average.
  • 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 Chemicals industry. The net income has significantly decreased by 101.5% when compared to the same quarter one year ago, falling from $13.50 million to -$0.20 million.
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OMNOVA Solutions Inc. provides emulsion polymers, specialty chemicals, and engineered surfaces for various commercial, industrial, and residential end uses primarily in North America, Europe, and Asia. The company operates in two segments, Performance Chemicals and Engineered Surfaces. The company has a P/E ratio of 13.7, below the S&P 500 P/E ratio of 17.7. Omnova has a market cap of $359.9 million and is part of the basic materials sector and chemicals industry. Shares are up 4.9% year to date as of the close of trading on Thursday.

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

-- Written by a member of TheStreet Ratings Staff

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