NEW YORK (TheStreet) -- Shares of Vale SA (VALE) nearly hit a 52-week low of $12.23 in morning trading Wednesday after Goldman Sachs (GS) said 2014 would mark the end of what it called the "Iron Age."
Iron ore prices have fallen sharply this year thanks in part to increased supply that exceeded demand. But Goldman Sachs does not think prices will recover.
The group said 2014 "is the inflection point where new production capacity finally catches up with demand growth, and profit margins begin their reversion to the historical mean," the group wrote in a report Wednesday entitled "The End of the Iron Age."
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Goldman Sachs trimmed its 2016 forecast for iron ore to $79 a metric ton from $82 and reduced its 2017 guidance to $78 from $85. It maintained its $80 outlook for 2015.
The stock was down 1.44% to $12.34 at 10:27 a.m.
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 revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- VALE's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 4.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 1113.0% when compared to the same quarter one year prior, rising from $117.72 million to $1,428.00 million.
- VALE SA reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VALE SA reported lower earnings of $0.01 versus $0.94 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $0.01).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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.
- VALE has underperformed the S&P 500 Index, declining 16.38% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full analysis from the report here: VALE Ratings Report
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