One Reason Oi S.A. (OIBR) Stock is Down Today

NEW YORK (TheStreet) -- Shares of Brazilian telecommunications company Oi S.A.  (OIBR) fell 6.02% to $2.03 on Wednesday amid ongoing fears that the company's proposed merger with Portugal Telecom  (PT) could fall apart.

Portugal Telecom investors voted on Monday to suspend a meeting to decide on the company's $8.7 billion sale of some of its assets to Altice until January 22, according to the New York Times.

The postponement occurred amid concerns about whether the deal, which would allow European and cable mobile services provider Altice to buy the Portuguese assets from Portugal Telecom, would destroy the proposed merger between Portugal Telecom and Oi.

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More than 4.6 million shares had changed hands as of 12:04 p.m., compared to the daily average volume of 1,116,620.

Separately, TheStreet Ratings team rates OI SA as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate OI SA (OIBR) 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 feeble growth in its earnings per share, unimpressive growth in net income, generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself."

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

  • OI 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. During the past fiscal year, OI SA reported lower earnings of $3.90 versus $7.93 in the prior year.
  • 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 95.9% when compared to the same quarter one year ago, falling from $77.29 million to $3.15 million.
  • Although OIBR's debt-to-equity ratio of 2.18 is very high, it is currently less than that of the industry average. Along with the unfavorable debt-to-equity ratio, OIBR maintains a poor quick ratio of 0.75, which illustrates the inability to avoid short-term cash problems.
  • 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. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, OI SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 85.12%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 100.00% 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.
  • You can view the full analysis from the report here: OIBR Ratings Report

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