NEW YORK (TheStreet) -- BP plc
(BP - Get Report) shares were upgraded to "buy" from "hold" by Canaccord Genuity on Monday.
The firm raised their price target to GBX 530p ($8.87) from GBX 470p ($7.86) --London Stock Exchange.
BP plc shares are down 0-0.6% to $47.15 in early market trading Monday on the New York Stock Exchange.
Must Read: Warren Buffett's 10 Favorite Growth Stocks
Canaccord believes that the market is putting too much weight into the litigation surrounding the 2010 Deepwater Horizon oil spill --referred to as Macondo in the note.
"A compelling valuation argument is building in favor of BP based on the free cash flow generation potential," said Canaccord. "In addition, Macondo pre-tax cash flows have slowed dramatically in the last year and we believe that with BP taking a tougher line in the US courts these cash out flows are likely to remain at much reduced levels while BP fights its case."
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.87 is somewhat weak and could be cause for future problems.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, BP PLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.7%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: BP Ratings Report