NEW YORK (TheStreet) -- National Electricity Company of Chile (NYSE:EOC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- The debt-to-equity ratio is somewhat low, currently at 0.74, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that EOC's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.
- Net operating cash flow has increased to $294.67 million or 27.54% when compared to the same quarter last year. Despite an increase in cash flow, ENDESA-EMPR NAC ELEC (CHILE)'s average is still marginally south of the industry average growth rate of 30.06%.
- ENDESA-EMPR NAC ELEC (CHILE)'s earnings per share declined by 33.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ENDESA-EMPR NAC ELEC (CHILE) reported lower earnings of $3.14 versus $4.23 in the prior year. This year, the market expects an improvement in earnings ($3.47 versus $3.14).
- EOC, with its decline in revenue, underperformed when compared the industry average of 9.1%. Since the same quarter one year prior, revenues slightly dropped by 5.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market, ENDESA-EMPR NAC ELEC (CHILE)'s return on equity exceeds that of both the industry average and the S&P 500.
-- 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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