Why Vale (VALE) Stock Is Up Today

NEW YORK (TheStreet) -- Vale (VALE) was gaining 2.1% to $13.13 Monday after China reported better than expected June flash manufacturing PMI data.

The HSBS flash PMI for June raised to 50.8 from May's 49.4, higher than the expected 49.7. The higher number may help firm up iron ore prices due to Chinese demand.

Despite the positive PMI data, analyst firm Credit Suisse does not see any real strength ahead. The firm forecasts iron ore prices to average $90 a ton in the second half of 2014, with averages of $89 a ton in 2015 and $87 a ton in 2016.

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TheStreet Ratings team rates VALE SA as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate VALE SA (VALE) 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 good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself."

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

  • Net operating cash flow has slightly increased to $4,082.00 million or 3.60% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -37.47%.
  • Despite currently having a low debt-to-equity ratio of 0.59, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that VALE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.57 is high and demonstrates strong liquidity.
  • The gross profit margin for VALE SA is rather high; currently it is at 51.08%. Regardless of VALE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VALE's net profit margin of 26.46% compares favorably to the industry average.
  • 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 decreased by 18.0% when compared to the same quarter one year ago, dropping from $3,068.10 million to $2,515.00 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 on the basis of return on equity, VALE SA underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • You can view the full analysis from the report here: VALE Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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.

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