Will This Price Target Cut Hurt AM Castle (CAS) Stock Today?

NEW YORK (TheStreet) -- AM Castle (CAS) stock has had its price target decreased to $16 from $17, Jefferies said Monday. The firm said the decrease was driven by reduced scrap margin outlook. A "buy" rating was reiterated.

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Separately, TheStreet Ratings team rates CASTLE (A M) & CO as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CASTLE (A M) & CO (CAS) 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. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

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

  • CAS, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues fell by 13.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • CAS's debt-to-equity ratio of 0.84 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.41 is sturdy.
  • CASTLE (A M) & CO's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CASTLE (A M) & CO reported poor results of -$1.46 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings (-$1.18 versus -$1.46).
  • 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 50.6% when compared to the same quarter one year ago, falling from -$10.62 million to -$16.00 million.
  • 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 Metals & Mining industry and the overall market, CASTLE (A M) & CO's return on equity significantly trails that of both the industry average and the S&P 500.
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