TheStreet Ratings Team has this to say about their recommendation:
"We rate FOREST OIL CORP (FST) a SELL. This is driven by some concerns, 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 22.94 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.45, which clearly demonstrates the inability to cover short-term cash needs.
- Net operating cash flow has significantly decreased to $8.85 million or 74.22% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much 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 43.59%, 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 101.6% in earnings (-$0.01 versus $0.61).
- The gross profit margin for FOREST OIL CORP is rather high; currently it is at 68.58%. Regardless of FST's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FST's net profit margin of -32.59% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: FST Ratings Report