Rating Change #9
Devon Energy Corp (DVN) 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, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, unimpressive growth in net income and a generally disappointing performance in the stock itself.
Highlights from the ratings report include:
- DVN's revenue growth has slightly outpaced the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 16.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for DEVON ENERGY CORP is rather high; currently it is at 62.30%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.70% is above that of the industry average.
- Despite currently having a low debt-to-equity ratio of 0.49, 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 1.32 is sturdy.
- DVN'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 28.37%, 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.
- Net operating cash flow has decreased to $1,026.00 million or 18.57% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
Devon Energy Corporation, an independent energy company, engages primarily in exploration, development, and production of oil, natural gas, and natural gas liquids. The company has a P/E ratio of 10.8, above the average energy industry P/E ratio of five and below the S&P 500 P/E ratio of 17.7. Devon Energy has a market cap of $22.78 billion and is part of the basic materials sector and energy industry. Shares are down 4.7% year to date as of the close of trading on Friday.You can view the full Devon Energy Ratings Report or get investment ideas from our investment research center.