NEW YORK (TheStreet) -- ArcelorMittal (MT) shares are falling, down -0.5% to $15.38, in early market trading on Thursday after being downgraded to "sell" from "neutral" by analysts at Goldman Sachs (GS).
The firm cites high valuation in relation to its competitors and weakness in the price of iron ore as reasons for the downgrade.
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TheStreet Ratings team rates ARCELORMITTAL SA as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ARCELORMITTAL SA (MT) 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 solid stock price performance, impressive record of earnings per share growth and revenue growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 72.06% and other important driving factors, this stock has surged by 27.43% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
- ARCELORMITTAL SA reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ARCELORMITTAL SA continued to lose money by earning -$1.46 versus -$2.23 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus -$1.46).
- Despite currently having a low debt-to-equity ratio of 0.45, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.45 is very low and demonstrates very weak liquidity.
- The gross profit margin for ARCELORMITTAL SA is currently extremely low, coming in at 8.30%. Regardless of MT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, MT's net profit margin of -6.18% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: MT Ratings Report