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) -- Globe Specialty Metals (Nasdaq: GSM) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
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- The revenue growth came in higher than the industry average of 4.0%. Since the same quarter one year prior, revenues rose by 12.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, GSM has a quick ratio of 2.09, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has increased to $27.00 million or 17.23% when compared to the same quarter last year. Despite an increase in cash flow, GLOBE SPECIALTY METALS INC's cash flow growth rate is still lower than the industry average growth rate of 41.39%.
- 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 on the basis of return on equity, GLOBE SPECIALTY METALS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for GLOBE SPECIALTY METALS INC is currently extremely low, coming in at 8.40%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -20.49% is significantly below that of the industry average.
-- Written by a member of TheStreet Ratings Staff