NEW YORK (TheStreet) -- EPL Oil and Gas (EPL) was downgraded to "hold" from "buy" by Brean Capital earlier this week. Energy XXI (EXXI - Get Report) announced that it was acquiring EPL in a merger last week and the downgrade comes on Brean Capital's belief that Energy XXI's $2.3 billion offer will not be topped. Brean Capital had raised its price target for the energy company in late February to $43 from $40.
Separately, TheStreet Ratings team rates EPL OIL & GAS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate EPL OIL & GAS INC (EPL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, solid stock price performance, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 2.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, EPL's share price has jumped by 36.83%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, EPL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Net operating cash flow has significantly increased by 52.96% to $78.40 million when compared to the same quarter last year. In addition, EPL OIL & GAS INC has also vastly surpassed the industry average cash flow growth rate of -23.54%.
- The gross profit margin for EPL OIL & GAS INC is rather high; currently it is at 69.82%. Regardless of EPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EPL's net profit margin of -8.45% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: EPL Ratings Report