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"We rate BRASKEM SA (BAK) 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 attractive valuation levels, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 360.95% to $389.24 million when compared to the same quarter last year. In addition, BRASKEM SA has also vastly surpassed the industry average cash flow growth rate of 12.85%.
- The revenue fell significantly faster than the industry average of 10.0%. Since the same quarter one year prior, revenues fell by 23.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Chemicals industry. The net income has significantly decreased by 52.3% when compared to the same quarter one year ago, falling from $179.33 million to $85.58 million.
- The debt-to-equity ratio is very high at 3.58 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, BAK maintains a poor quick ratio of 0.76, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: BAK Ratings Report