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Enerplus Corp Stock Downgraded (ERF)

NEW YORK ( TheStreet) -- Enerplus (NYSE: ERF) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • ENERPLUS CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, ENERPLUS CORP reported lower earnings of $0.62 versus $0.71 in the prior year.
  • 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 62.6% when compared to the same quarter one year ago, falling from $267.98 million to $100.26 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENERPLUS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has declined marginally to $157.26 million or 3.71% when compared to the same quarter last year. Despite a decrease in cash flow of 3.71%, ENERPLUS CORP is in line with the industry average cash flow growth rate of -9.26%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 47.59%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 65.77% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

Enerplus Corporation, together with subsidiaries, engages in the exploration and development of crude oil and natural gas in United States and Canada. As of December 31, 2011, it had 322 MMBOE of proved plus probable reserves. The company has a P/E ratio of 53.8, above the average energy industry P/E ratio of 37.7 and above the S&P 500 P/E ratio of 17.7. Enerplus has a market cap of $2.82 billion and is part of the basic materials sector and energy industry. Shares are down 43.5% year to date as of the close of trading on Monday.

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

-- 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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