NEW YORK (TheStreet) -- Shares of Denbury Resources (DNR) - Get Denbury Resources Inc. Report are down 5.05% to $7.90 as oil fell on Monday, reversing gains after Saudi Arabia indicated it could increase its output, Reuters reports.
Saudi Arabia convinced its fellow OPEC members that it is not in the group's interest to cut oil output however far prices may fall, the kingdom's oil minister Ali al-Naimi said in an interview with the Middle East Economic Survey (MEES), according to Reuters.
On the New York Mercantile Exchange, West Texas Intermediate for February delivery was down 1.72% a barrel to $56.15 at 9:38 a.m. in New York. February Brent crude was lower by 1.06% to $60.73.
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Separately, JPMorgan cut the Texas-based oil and gas company's price target to $7 from $12 last week while reiterating its "outperform" rating, as the firm believes that the company will experience solid production growth in the fourth quarter of the next three years.
TheStreet Ratings team rates DENBURY RESOURCES INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate DENBURY RESOURCES INC (DNR) 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 increase in net income, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 163.3% when compared to the same quarter one year prior, rising from $102.05 million to $268.75 million.
- The debt-to-equity ratio is somewhat low, currently at 0.67, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that DNR's debt-to-equity ratio is low, the quick ratio, which is currently 0.66, displays a potential problem in covering short-term cash needs.
- DNR'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 54.68%, 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.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DENBURY RESOURCES INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: DNR Ratings Report