NEW YORK (TheStreet) -- Shares of Brazil's Vale SA (VALE) are down 1.15% to $8.63 after it was reported that the company is considering listing part of its global base metals business, sources told Reuters, as the miner looks to fund capital projects amid a collapse in iron ore prices.
The world's top iron ore producer is likely to retain a majority interest in the new entity if it proceeds with the plan, sources said, according to Reuters.
Vale could outline the plan to list a new entity in Toronto and London as early as Tuesday at an investor day event being held in New York, one source told Reuters.
The second source said there had been significant discussion inside Vale about listing the base metals assets, which have fared better than its iron ore business due to steadier prices, Reuters reports.
Vale's iron ore business contributed 62% of the company's gross revenue in the third quarter, but the miner has been affected alongside its peers by falling iron ore prices this year which have slumped to five-year lows below $70 a ton.
Separately, TheStreet Ratings team rates VALE SA as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate VALE SA (VALE) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 Metals & Mining industry. The net income has significantly decreased by 140.3% when compared to the same quarter one year ago, falling from $3,565.05 million to -$1,437.00 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.03%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 140.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, VALE SA has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has decreased to $2,940.00 million or 36.54% when compared to the same quarter last year. Despite a decrease in cash flow VALE SA is still fairing well by exceeding its industry average cash flow growth rate of -55.16%.
- VALE SA has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse 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 ($1.18 versus $0.01).
- You can view the full analysis from the report here: VALE Ratings Report