New Gold (NGD) Downgraded at Credit Suisse

NEW YORK (TheStreet) -- New Gold (NGD) received a downgrade from Credit Suisse based on a valuation call. 

The investment bank gave the miner a "neutral" rating from "outperform" and a price target of $6.50.

Over Wednesday, shares climbed 2.7% to $5.65.

TheStreet Ratings team rates NEW GOLD INC as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate NEW GOLD INC (NGD) 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, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself."

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

  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.7%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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.
  • NGD's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.30, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, NEW GOLD INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • 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 31.5% when compared to the same quarter one year ago, falling from $17.80 million to $12.20 million.
  • Net operating cash flow has decreased to $36.20 million or 22.48% 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.

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