NEW YORK (TheStreet) -- Transportadora de Gas del Sur (NYSE:TGS) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- TGS's revenue growth has slightly outpaced the industry average of 5.2%. Since the same quarter one year prior, revenues rose by 12.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.83, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, TGS has a quick ratio of 1.64, which demonstrates the ability of the company to cover short-term liquidity needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Gas Utilities industry and the overall market on the basis of return on equity, TRANSPORTADORA DE GAS SUR has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Looking at the price performance of TGS's shares over the past 12 months, there is not much good news to report: the stock is down 50.39%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Gas Utilities industry average. The net income has decreased by 9.8% when compared to the same quarter one year ago, dropping from $20.11 million to $18.14 million.
-- Written by a member of TheStreet Ratings Staff
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