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TSC Ratings' Updates: Allegiant

We've initiated coverage on oil and gas company SandRidge Energy (SD) at sell, driven by its generally disappointing historical performance in the stock itself and generally weak debt management.

The company's debt-to-equity ratio of 0.83 is somewhat low overall, but it is high when compared to the industry average. Its quick ratio of 0.33 is very low and demonstrates very weak liquidity. On the basis of return on equity, SandRidge has underperformed the oil, gas and consumable fuels industry and the S&P 500.

The company's gross profit margin is rather high at 67.7%, having increased from the same quarter the previous year. Along with this, the net profit margin of 69.00% significantly outperformed against the industry average. Net operating cash flow has significantly increased by 304.57% to $237.53 million when compared with the same quarter last year, vastly surpassing the industry average cash flow growth rate of 22.58%.

Shares are down 81.5% on the year, underperforming the S&P 500, but the tock is still more expensive (when compared with its current earnings) than most other companies in its industry.

We've upgraded South Jersey Industries (SJI), which engages in the purchase, transmission, and sale of natural gas, from hold to buy, driven by its revenue growth, increase in net income, expanding profit margins, growth in earnings per share and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Revenue rose by 34.7% since the same quarter a year ago, outpacing the industry average of 33.4% growth and boosting EPS. Net income growth of 413.4% from the same quarter one year ago has significantly exceeded that of the S&P 500 and the gas utilities industry. SJI's 41.2% gross profit margin is strong, having increased significantly from the same period last year, and its net profit margin of 20.8% significantly outperformed against the industry average.

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