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TheStreet Ratings Top 10 Rating Changes

Rating Change #4

Calpine Corp (CPN - Get Report) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally weak debt management, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 2.44 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, CPN maintains a poor quick ratio of 0.71, which illustrates the inability to avoid short-term cash problems.
  • Net operating cash flow has significantly decreased to $71.00 million or 52.34% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for CALPINE CORP is currently lower than what is desirable, coming in at 31.00%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.70% trails the industry average.
  • CPN, with its decline in revenue, underperformed when compared the industry average of 12.1%. Since the same quarter one year prior, revenues fell by 17.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 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 Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, CALPINE CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

Calpine Corporation, an independent wholesale power generation company, owns and operates natural gas-fired and geothermal power plants in North America. It operates natural gas-fired combustion turbines and renewable geothermal conventional steam turbines, as well as cogeneration power plants. The company has a P/E ratio of 83.5, equal to the average utilities industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Calpine has a market cap of $8.07 billion and is part of the utilities sector and utilities industry. Shares are up 2.8% year to date as of the close of trading on Tuesday.

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

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