The law firm has opened an investigation on behalf of some of Forest Oil's investors for potential violations of federal securities laws. The investigation centers on particular Forest Oil statements made between Oct. 3, 2013 and Feb. 26, 2014 with regard to its financial performance and prospects. The law firm believes the company misled its investors, specifically with regard to its projected revenues and oil reserves.
Forest Oil announced fourth quarter and year-end 2013 financial results on Jan. 24, 2014 and reported a year-over-year revenue decline to $88.49 million from $154.9 million and a decline in estimated proved reserves to625 billion cubic feet from 1,363 billion cubic feet.
"On this news, the price of the Company's stock dropped precipitously on unusually heavy trading volume," the law firm states on its website.Must Read: Warren Buffett's 10 Favorite Dividend Stocks STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. TheStreet Ratings team rates FOREST OIL CORP as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation: "We rate FOREST OIL CORP (FST) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself." Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 14.69 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, FST has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly decreased to $17.77 million or 79.29% 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.
- FST'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 65.45%, 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. 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.
- FOREST OIL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, FOREST OIL CORP turned its bottom line around by earning $0.61 versus -$11.18 in the prior year. For the next year, the market is expecting a contraction of 39.3% in earnings ($0.37 versus $0.61).
- The revenue fell significantly faster than the industry average of 3.8%. Since the same quarter one year prior, revenues fell by 42.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: FST Ratings Report
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