NEW YORK (TheStreet) -- Shares of Magnum Hunter Resources Corp. (MHR) are higher by 1.96% to $7.81 in pre-market trading on Monday following an upgrade to "buy" from "hold" at Stifel Nicolaus (SF - Get Report).
The firm said it raised its rating on the independent oil and gas company based on its belief the private placement the company announced last week will remove any financial overhang.
Last week Magnum announced it entered into an agreement with Relational Investors LLC to sell, in a private offering, an aggregate of 21,428,580 shares of common stock.
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Separately, TheStreet Ratings team rates MAGNUM HUNTER RESOURCES CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate MAGNUM HUNTER RESOURCES CORP (MHR) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MHR's very impressive revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues leaped by 91.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 31.81% and other important driving factors, this stock has surged by 137.68% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- MAGNUM HUNTER RESOURCES CORP has improved earnings per share by 31.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MAGNUM HUNTER RESOURCES CORP reported poor results of -$1.53 versus -$0.96 in the prior year. This year, the market expects an improvement in earnings (-$0.60 versus -$1.53).
- The debt-to-equity ratio of 1.40 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, MHR has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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, MAGNUM HUNTER RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: MHR Ratings Report