NEW YORK (TheStreet) -- General Steel Holdings (GSI) shares are soaring 29.43% to $3.54 on heavy trading volume Tuesday after the company announced earlier today that it's exiting its steel manufacturing business.
This comes as the company has been struggling in China, seeing persistently depressed market trends for the steel business.
On December 30, the board approved the company's deal to sell its wholly-owned General Steel (China) and its entire equity interest in Shaanxi Longmen Iron and Steel Co. for $1 million to an affiliate of Victory Energy Resource, the company said.
"The timely divesture of the steel manufacturing business is necessary for General Steel in order to preserve liquid assets that will enable the company to survive and to focus on the promising cleantech business," CEO Ms. Yunshan Li stated.
Additionally, the company said that the NYSE has notified them that it has fallen below the NYSE's continued listing standard.
Under the NYSE regulations, the company has a cure period of six months from receipt of the NYSE's notice to achieve compliance with the continued listing standard.
As of 11:34 a.m. more than 5 million shares are changing hands, above the company's average trading volume of about 70,000 shares.
Based in Beijing, General Steel Holdings manufactures and sells steel products in the People's Republic of China.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate GENERAL STEEL HOLDINGS INC as a Sell with a ratings score of D-. 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 feeble growth in its earnings per share, deteriorating net income, weak operating cash flow and generally disappointing historical performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GENERAL STEEL HOLDINGS INC 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 suffered a declining pattern earnings per share over the past two years. During the past fiscal year, GENERAL STEEL HOLDINGS INC reported poor results of -$4.40 versus -$2.95 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 Metals & Mining industry. The net income has significantly decreased by 5481.5% when compared to the same quarter one year ago, falling from -$11.02 million to -$615.03 million.
- Net operating cash flow has significantly decreased to -$206.60 million or 468.04% 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 55.32%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 4800.00% 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.
- Despite the weak revenue results, GSI has significantly outperformed against the industry average of 45.9%. Since the same quarter one year prior, revenues fell by 10.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: GSI