NEW YORK (TheStreet) -- UBS has initiated coverage on Scorpio Tankers (STNG) with a "buy" rating, the firm said Friday. The rating is driven by a bullish outlook on the product tanker market and substantial cash flow which should increase dividends.
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Separately, TheStreet Ratings team rates SCORPIO TANKERS INC as a Hold with a ratings score of C. The team has this to say about their recommendation:
"We rate SCORPIO TANKERS INC (STNG) 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- STNG's very impressive revenue growth greatly exceeded the industry average of 7.7%. Since the same quarter one year prior, revenues leaped by 77.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- STNG's debt-to-equity ratio is very low at 0.12 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 2.50, which clearly demonstrates the ability to cover short-term cash needs.
- 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.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SCORPIO TANKERS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for SCORPIO TANKERS INC is currently extremely low, coming in at 6.63%. It has decreased significantly from the same period last year. Regardless of the weak results of the gross profit margin, the net profit margin of 10.81% is above that of the industry average.
- You can view the full analysis from the report here: STNG Ratings Report