New Gold Inc. Stock Downgraded (NGD)
Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model .
NEW YORK ( TheStreet) -- New Gold (NGD"> NGD) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.9%. Since the same quarter one year prior, revenues rose by 11.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for NEW GOLD INC is rather high; currently it is at 54.60%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.10% trails the industry average.
- NGD's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
- Net operating cash flow has decreased to $46.70 million or 33.19% 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 25.22%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 66.66% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, NGD is still more expensive than most of the other companies in its industry.
New Gold Inc., a gold mining company, engages in the acquisition, exploration, extraction, processing, and reclamation of mineral properties. It primarily explore for gold, silver, and copper deposits. The company has a P/E ratio of 39.5, above the S&P 500 P/E ratio of 17.7. New has a market cap of $4.32 billion and is part of the basic materials sector and metals & mining industry. Shares are down 17.7% year to date as of the close of trading on Monday.