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Denbury Resources Inc Stock Downgraded (DNR)

NEW YORK (TheStreet) -- Denbury Resources (NYSE:DNR) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 11.8%. Since the same quarter one year prior, revenues rose by 25.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • DENBURY RESOURCES INC 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DENBURY RESOURCES INC increased its bottom line by earning $1.41 versus $0.76 in the prior year. This year, the market expects an improvement in earnings ($1.66 versus $1.41).
  • Despite currently having a low debt-to-equity ratio of 0.56, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.11 is sturdy.
  • 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, DENBURY RESOURCES INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • DNR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 31.63%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.

Denbury Resources Inc. engages in the acquisition, development, exploitation, and exploration of oil and natural gas properties in the Gulf Coast region located in Mississippi, Texas, Louisiana, and Alabama. The company has a P/E ratio of 8.6, equal to the average energy industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Denbury has a market cap of $5.91 billion and is part of the basic materials sector and energy industry. Shares are down 4.4% year to date as of the close of trading on Monday.

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

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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