Genco Shipping (GNK) Tumbles After Friday's Rally

NEW YORK (TheStreet) -- Genco Shipping & Trading (GNK) is tumbling on Monday, reversing gains achieved towards the end of last week.

By late morning, shares had taken off 7.2% to $1.80.

Shares of the deep-sea freighter saw a sharp spike on Friday after the company said in an 8-K SEC filing that it had entered into a restructuring with certain lenders that gives it a strategy to reorganize under Chapter 11 bankruptcy protection.

The parties involved said they would negotiate and executive all definitive documents no later than April 13.

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GNK Chart GNK data by YCharts

TheStreet Ratings team rates GENCO SHIPPING & TRADING as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENCO SHIPPING & TRADING (GNK) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself."

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

  • Currently the debt-to-equity ratio of 1.63 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 this, the company manages to maintain a quick ratio of 0.09, which clearly demonstrates the inability to cover short-term cash needs.
  • 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, GENCO SHIPPING & TRADING's return on equity significantly trails that of both the industry average and the S&P 500.
  • GNK's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 44.17%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • GENCO SHIPPING & TRADING has improved earnings per share by 10.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GENCO SHIPPING & TRADING swung to a loss, reporting -$3.48 versus $0.72 in the prior year. This year, the market expects an improvement in earnings (-$3.45 versus -$3.48).
  • The net income growth from the same quarter one year ago has exceeded that of the Marine industry average, but is less than that of the S&P 500. The net income increased by 8.8% when compared to the same quarter one year prior, going from -$38.42 million to -$35.03 million.
  • You can view the full analysis from the report here: GNK Ratings Report
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