NEW YORK (TheStreet) -- SM Energy (NYSE:SM) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and disappointing return on equity.
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- Net operating cash flow has slightly increased to $222.24 million or 4.19% when compared to the same quarter last year. In addition, SM ENERGY CO has also vastly surpassed the industry average cash flow growth rate of -54.29%.
- The gross profit margin for SM ENERGY CO is rather high; currently it is at 55.30%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.60% trails the industry average.
- SM, with its decline in revenue, underperformed when compared the industry average of 6.5%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 80.0% when compared to the same quarter one year ago, falling from $124.53 million to $24.89 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.41%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 80.10% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, SM is still more expensive than most of the other companies in its industry.
-- 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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