Potash Corp Of Saskatchewan Inc Stock Downgraded (POT)

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.

NEW YORK ( TheStreet) -- Potash Corp of Saskatchewan (NYSE: POT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow.

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Highlights from the ratings report include:
  • 45.45% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. Regardless of POT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, POT's net profit margin of 24.94% significantly outperformed against the industry.
  • The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that POT's debt-to-equity ratio is low, the quick ratio, which is currently 0.66, displays a potential problem in covering short-term cash needs.
  • POT, with its decline in revenue, underperformed when compared the industry average of 8.4%. Since the same quarter one year prior, revenues fell by 11.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Chemicals industry. The net income has significantly decreased by 26.6% when compared to the same quarter one year ago, falling from $643.00 million to $472.00 million.
  • Net operating cash flow has decreased to $788.00 million or 34.44% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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