We've downgraded home heating oil distributor
Star Gas Partners
(SGU - Get Report)
from hold to sell, driven by its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
Net income fell to -$91.9 million in the most recent quarter from -$33.1 million in the same quarter a year ago, significantly underperforming the S&P 500 and the gas utilities industry. Return on equity has also greatly decreased since same quarter one year prior, a signal of major weakness within the corporation; on the basis of ROE, Star Gas also underperforms the S&P 500 and the industry average. The company's gross profit margin of 19.1% is rather low, though it has increased from the same period last year. Its net profit margin of -55.4% significantly underperformed the industry average.
EPS experienced a steep decline of 188.1% compared with the same quarter a year ago, continuing a two-year pattern of declining EPS. During the past fiscal year, Star Gas swung to a loss, reporting -17 cents vs. 51 cents in the prior year. Shares are down 41.2% on the year, reflecting the overall market decline as well as the company's decline in EPS. In one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now