NEW YORK (TheStreet) -- Linn Energy (Nasdaq:LINE) 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, compelling growth in net income and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- LINE's very impressive revenue growth greatly exceeded the industry average of 11.8%. Since the same quarter one year prior, revenues leaped by 380.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 98.6% when compared to the same quarter one year prior, rising from -$446.68 million to -$6.20 million.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, LINN ENERGY LLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The debt-to-equity ratio of 1.22 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, LINE has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly decreased to $35.51 million or 67.10% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
-- 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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