Why Vale SA (VALE) Stock Hit a One-Year Low Today

NEW YORK (TheStreet) -- Shares of Vale SA  (VALE) hit a 52-week low of $11.96 on Friday after Moody's (MCO) said falling iron ore prices would continue to affect construction and mining stocks for the near future.

Iron ore prices have fallen by nearly 40% this year as large miners increase production while China's housing market has slumped. Benchmark iron ore prices for imports into China are trading at approximately $83.50 a ton, and Moody's expects prices to reach $85 to $95 a ton for the rest of 2014.

But the firm also anticipates prices will increase to a range of $95 to $105 a ton in 2015 as high cost producers leave the market. Moody's also said lower growth in China and increased iron ore supply could limit the price increase.

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The firm noted lower prices are hurting local producers and would do so for the next six months to a year.

More than 23.5 million shares had changed hands as of 3:15 p.m., compared to the average volume of 18,092,800.

Separately, 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 24.68% 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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