NEW YORK (TheStreet) -- Vale SA (VALE) shares are down 0.62% to $6.40 in trading on Wednesday as the company considers selling between 25% and 30% of its base metals business in an initial public offering, according to Bloomberg.
Vale, the worlds largest nickel producer, is looking to divest some of its assets as metal prices continue to decline.
The company has revised its base metals unit EBITDA forecast to between $3.1 billion and $4.6 billion after originally forecasting base metals EBITDA between $4 billion and $6 billion.
HSBC analysts estimate that the base metal unit will contribute about 42% to the company's EBITDA this year and about 54% in 2016, according to Bloomberg.
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 few notable weaknesses, 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 224.0% when compared to the same quarter one year ago, falling from $2,515.00 million to -$3,118.00 million.
- 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, VALE SA's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $531.00 million or 86.99% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 48.26%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 224.48% 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.
- 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, VALE SA increased its bottom line by earning $0.13 versus $0.01 in the prior year. For the next year, the market is expecting a contraction of 242.3% in earnings (-$0.19 versus $0.13).
- You can view the full analysis from the report here: VALE Ratings Report