NEW YORK (TheStreet) -- Dynegy (DYN - Get Report) shares are climbing, up 2% to $35.06, on Thursday following news that it is bidding on a Duke Energy (DUK) portfolio of 11 Midwestern power plants.
The plants are expected to sell for between $2 billion - $2.5 billion and represents a stark turnaround for Dynegy which emerged from bankruptcy two years ago.
Duke Energy shares are up 1.1% to $71.78.
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TheStreet Ratings team rates DYNEGY INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate DYNEGY INC (DYN) a SELL. This is driven by a number of negative factors, 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 disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 Independent Power Producers & Energy Traders industry and the overall market, DYNEGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for DYNEGY INC is currently extremely low, coming in at 13.12%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -5.38% trails the industry average.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Independent Power Producers & Energy Traders industry average, but is greater than that of the S&P 500. The net income increased by 71.1% when compared to the same quarter one year prior, rising from -$142.00 million to -$41.00 million.
- DYNEGY INC reported significant earnings per share improvement 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, DYNEGY INC swung to a loss, reporting -$3.59 versus $7.89 in the prior year. This year, the market expects an improvement in earnings ($0.11 versus -$3.59).
- This stock has increased by 37.23% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in DYN do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
- You can view the full analysis from the report here: DYN Ratings Report