(MPET - Get Report)
, which engages in the sale of oil and gas, and exploration and development of oil and gas reserves, was downgraded to sell. The downgrade 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 result.
The company's weaknesses can be seen in multiple areas, such as in its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow. Magellan's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, the company earned 1 cent per share vs. 3 cents in the prior year.
In its recent quarterly report, the company's net income deteriorated significantly, falling to a loss of $9.68 million from a loss of $0.01 million when compared with the same quarter one year ago. The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared with that of the S&P 500 and the Oil, Gas & Consumable Fuels industry.
There was also weakness in its cash flow from its operations -- net operating cash flow has decreased by 19.77% to $2.67 million when compared with the same quarter last year. Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared with other companies in the Oil, Gas & Consumable Fuels industry and the overall market, Magellan Petroleum's return on equity significantly trails that of both the industry average and the S&P 500. This stock's share value has moved by only 19.77% over the past year.