NEW YORK (TheStreet) -- Shares of Noranda Aluminum (NOR) were falling 25.8% to $2.23 Tuesday after the announcement that Apollo Global Management (APO) will sell its stake of 22.84 million shares of the aluminum producer in a secondary public offering.
Following the offering Apollo Global will no longer hold any shares of Noranda Aluminum. Apollo Management held about 33.1% of the aluminum producer prior to the offering.
Noranda Aluminum said it expects Matthew R. Michelini, Matthew H. Nord, Eric L. Press, and Robert J. Kalsow-Ramos, who are affiliates of Apollo Global, to resign from the company's board of directors following the offering.
The offering is expected to close on or about May 15, 2015, and Noranda Aluminum will receive no proceeds from the offering.
About 3.8 million shares of Noranda Aluminum were traded by 9:46 a.m. Tuesday, above the average trading volume of about 355,000 shares a day.
TheStreet Ratings team rates NORANDA ALUMINUM HOLDING CP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate NORANDA ALUMINUM HOLDING CP (NOR) a SELL. This is driven by some concerns, 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 generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 10.11 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, NOR has a quick ratio of 0.63, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Metals & Mining industry and the overall market, NORANDA ALUMINUM HOLDING CP's return on equity significantly trails that of both the industry average and the S&P 500.
- NOR has underperformed the S&P 500 Index, declining 5.60% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for NORANDA ALUMINUM HOLDING CP is rather low; currently it is at 18.17%. Regardless of NOR'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 0.50% trails the industry average.
- Net operating cash flow has increased to $26.40 million or 12.82% when compared to the same quarter last year. In addition, NORANDA ALUMINUM HOLDING CP has also vastly surpassed the industry average cash flow growth rate of -46.77%.
- You can view the full analysis from the report here: NOR Ratings Report