NEW YORK (TheStreet) -- Shares of Peabody Energy Corp. (BTU) are down -0.96% to $16.45 in pre-market trade after Deutsche Bank (DB) downgraded the company to "hold" from "buy" and lowered the price target to $19 from $22 on valuation and an elevated cautionary outlook.
Separately, TheStreet Ratings team rates PEABODY ENERGY CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate PEABODY ENERGY CORP (BTU) a SELL. This is driven by a few notable 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 unimpressive growth in net income, generally high debt management risk, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 107.3% when compared to the same quarter one year ago, falling from -$23.40 million to -$48.50 million.
- Currently the debt-to-equity ratio of 1.51 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, BTU has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- The gross profit margin for PEABODY ENERGY CORP is rather low; currently it is at 15.22%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.98% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $54.10 million or 80.08% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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, PEABODY ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: BTU Ratings Report