How Will Mercer International (MERC) Stock Be Affected by This Ratings Downgrade?

NEW YORK (TheStreet) -- Credit Suisse downgraded Mercer International Inc. (MERC) to "neutral" from "outperform" earlier on Thursday.

The firm said it lowered the Vancouver-based pulp manufacturing company's ratings because of price appreciation.

Credit Suisse reiterated its price target of $12, and maintained its EPS estimates through 2016.  

Must Read: Warren Buffett's 25 Favorite Stocks STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. "Our MERC downgrade is largely premised on share price appreciation and, in our view, a less preferential potential risk-reward relationship," said Credit Suisse analyst Andrew M. Kuske. Shares of Mercer  closed up 1.17% to $11.22. Separately, TheStreet Ratings team rates MERCER INTL INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation: "We rate MERCER INTL INC (MERC) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and poor profit margins." Highlights from the analysis by TheStreet Ratings Team goes as follows: MERC's revenue growth has slightly outpaced the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 2.9%. Growth in the company's revenue appears to have helped boost the earnings per share. The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Paper & Forest Products industry. The net income increased by 104.4% when compared to the same quarter one year prior, rising from -$12.90 million to $0.57 million. MERCER INTL INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MERCER INTL INC reported poor results of -$0.47 versus -$0.28 in the prior year. This year, the market expects an improvement in earnings ($0.56 versus -$0.47). Net operating cash flow has decreased to $21.29 million or 12.44% when compared to the same quarter last year. Despite a decrease in cash flow MERCER INTL INC is still fairing well by exceeding its industry average cash flow growth rate of -28.38%. The debt-to-equity ratio is very high at 2.19 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, MERC has managed to keep a strong quick ratio of 2.10, which demonstrates the ability to cover short-term cash needs. You can view the full analysis from the report here: MERC Ratings Report STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.