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Vanguard Natural Resources LLC Stock Downgraded (VNR)

NEW YORK ( TheStreet) -- Vanguard Natural Resources (NYSE: VNR) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we find that the company has not been very careful in the management of its balance sheet.

Highlights from the ratings report include:

  • Currently the debt-to-equity ratio of 1.83 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.16, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, VANGUARD NATURAL RESOURCES's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for VANGUARD NATURAL RESOURCES is rather high; currently it is at 51.40%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -41.80% is in-line with the industry average.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 85.8% when compared to the same quarter one year prior, rising from -$39.70 million to -$5.64 million.
  • VANGUARD NATURAL RESOURCES 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, VANGUARD NATURAL RESOURCES turned its bottom line around by earning $1.22 versus -$6.78 in the prior year. This year, the market expects an improvement in earnings ($2.35 versus $1.22).

Vanguard Natural Resources, LLC, through its subsidiaries, engages in the acquisition and development of natural gas and oil properties in the United States. The company has a P/E ratio of 29.1, equal to the average energy industry P/E ratio and above the S&P 500 P/E ratio of 17.2. Vanguard Natural has a market cap of $867.8 million and is part of the basic materials sector and energy industry. Shares are up 3.1% year to date as of the close of trading on Friday.

You can view the full Vanguard Natural Ratings Report or get investment ideas from our investment research center.

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