Universal Corp Stock Downgraded (UVV)

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) -- Universal (NYSE: UVV) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 50.68% to -$114.89 million when compared to the same quarter last year. In addition, UNIVERSAL CORP/VA has also vastly surpassed the industry average cash flow growth rate of -30.66%.
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that UVV's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
  • UNIVERSAL CORP/VA has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, UNIVERSAL CORP/VA increased its bottom line by earning $5.25 versus $4.66 in the prior year.
  • The share price of UNIVERSAL CORP/VA has not done very well: it is down 8.23% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • 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 Tobacco industry. The net income has significantly decreased by 98.8% when compared to the same quarter one year ago, falling from $58.31 million to $0.72 million.

Universal Corporation operates as a leaf tobacco merchant and processor worldwide. It is engaged in procuring, financing, processing, packing, storing, and shipping leaf tobacco for sale to, or for the account of, manufacturers of consumer tobacco products. Universal has a market cap of $1.21 billion and is part of the consumer goods sector and tobacco industry. Shares are down 5% year to date as of the close of trading on Thursday.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

If you liked this article you might like

Guess the Surprising Big Winners Among These 10 Cheap Stocks That Pay Dividends

Guess the Surprising Big Winners Among These 10 Cheap Stocks That Pay Dividends

So Far, So Good With This Year's 'Poor-Man's Value Portfolio'

So Far, So Good With This Year's 'Poor-Man's Value Portfolio'

Introducing My 2018 Double Net Value Portfolio

Introducing My 2018 Double Net Value Portfolio

Time to Close the Books on My 2017 Double Net Value Portfolio

Time to Close the Books on My 2017 Double Net Value Portfolio

This Value Portfolio Is Producing Valuable Returns, Thank You

This Value Portfolio Is Producing Valuable Returns, Thank You