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"We rate LSB INDUSTRIES INC (LXU) 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 compelling growth in net income, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, poor profit margins and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 49.6% when compared to the same quarter one year prior, rising from $7.43 million to $11.11 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Chemicals industry and the overall market on the basis of return on equity, LSB INDUSTRIES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for LSB INDUSTRIES INC is currently lower than what is desirable, coming in at 28.54%. Regardless of LXU's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.51% trails the industry average.
- The debt-to-equity ratio of 1.07 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, LXU has managed to keep a strong quick ratio of 2.13, which demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: LXU Ratings Report