Why Pacific Ethanol (PEIX) Stock Is Down Today

NEW YORK (TheStreet) --Pacific Ethanol (PEIX)  fell 7.4% to $21.31 Thursday, and continues to fall in after-hours trading, on fears that the U.S. ethanol industry could soon see an increase in Brazilian imports.

On Wednesday Brazil approved a tax credit for ethanol exporters in the country. Brazil's Finance Minister said the tax credit "will help exporters because it cheapens the Brazilian export and pays a devaluation of the exchange rate."

Demand for ethanol in Brazil fell over the past few yeas due to a decrease in flex-fuel cars in the country, according to Bloomberg. In 2013 25% of flex0fuel vehicles in Brazil used ethanol, down from 82% in 2009.

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Shares of other U.S. ethanol producers such as Green Plains (GPRE) , Rex American Resources (REX) , and KiOR (KIOR) are also down following the news.

TheStreet Ratings team rates PACIFIC ETHANOL INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate PACIFIC ETHANOL INC (PEIX) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

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

  • The revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 37.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • PEIX's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, PEIX has a quick ratio of 2.07, which demonstrates the ability of the company to cover short-term liquidity needs.
  • PACIFIC ETHANOL INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, PACIFIC ETHANOL INC continued to lose money by earning -$0.39 versus -$2.70 in the prior year. This year, the market expects an improvement in earnings ($3.29 versus -$0.39).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 1381.6% when compared to the same quarter one year prior, rising from $1.05 million to $15.57 million.
  • Net operating cash flow has significantly increased by 950.35% to $28.45 million when compared to the same quarter last year. In addition, PACIFIC ETHANOL INC has also vastly surpassed the industry average cash flow growth rate of -5.22%.
  • You can view the full analysis from the report here: PEIX Ratings Report

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