It is reported that Reliance Steel and Aluminium has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, robust revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the ratings report include:
Reliance Steel & Aluminium Co reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, Reliance Steel & Aluminium Co increased its bottom line by earning USD 2.61 versus USD 2.01 in the prior year. This year, the market expects an improvement in earnings of USD 4.53 versus USD 2.61
RS's revenue growth trails the industry average of 52.0%. Since the same quarter one year prior, revenues rose by 26.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
Despite currently having a low debt to equity ratio of 0.37, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt to equity ratio, the company's quick ratio of 1.49 is sturdy
The gross profit margin for Reliance Steel & Aluminium Co is rather low; currently it is at 24.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.80% significantly trails the industry average
Net operating cash flow has decreased to USD 15.90 million or 15.48% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower
Reliance Steel & Aluminium Co operates metals service centers. The company has a P/E ratio of 9.1, equal to the average industrial industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Reliance Steel and Aluminium has a market cap of USD 2.5 billion and is part of the industrial goods sector and industrial industry.
(Sourced from TheStreet)
