Huntsman Corporation Stock Downgraded (HUN)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Huntsman Corporation (NYSE: HUN) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and poor profit margins.

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Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 202.5% when compared to the same quarter one year prior, rising from -$40.00 million to $41.00 million.
  • HUN's revenue growth trails the industry average of 13.3%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • Currently the debt-to-equity ratio of 1.84 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, HUN maintains a poor quick ratio of 0.97, which illustrates the inability to avoid short-term cash problems.
  • 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. In comparison to the other companies in the Chemicals industry and the overall market, HUNTSMAN CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

Polymers division is reorganizing under Chapter 11 (10-14-02). Huntsman has a market cap of $5.46 billion and is part of the basic materials sector and chemicals industry. Shares are down 8.6% year to date as of the close of trading on Thursday.

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

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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