Why DryShips (DRYS) is on Course For Gains Thursday

NEW YORK (TheStreet) -- Drybulk carrier DryShips (DRYS) surged in morning trading on Thursday after the company suspended a previously announced stock offering. While details of the suspension were scarce, the company said in a statement that it reserved the right to reactivate or terminate the program at any time.

The Greece-based shipper announced in October it planned to offer $200 million of common shares to raise capital and put the company in good stead for 2014.

"Drybulk shipping rates and ship values have increased recently and we believe this trend will continue, particularly in the larger asset classes," said CEO George Economou in a statement early October. "We believe this is an opportune time to flexibly access the equity capital markets to reduce some or all of our funding needs through 2014 that we currently estimate at $150 million."

The company also said it was nearing agreements with banks to repay debt service payments in 2014. In the third quarter ended Sep. 30, DryShips had $5.2 billion in debt on its balance sheet.

During Thursday morning trading, DryShips shares were up 5.5% to $3.59. Year to date, the stock has risen 118%.

TheStreet Ratings team rates DryShips Inc as a Hold with a ratings score of C-. The team has this to say about its recommendation:

"We rate DryShips Inc (DRYS) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DRYS's revenue growth has slightly outpaced the industry average of 8.6%. Since the same quarter one year prior, revenues rose by 17.8%. 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.
  • Compared to its closing price of one year ago, DRYS's share price has jumped by 78.8%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The gross profit margin for DryShips Inc is rather high; currently it is at 55.52%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -15.77% is in-line with the industry average.
  • 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. Compared to other companies in the Marine industry and the overall market, DryShips Inc's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $48.85 million or 40.58% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
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