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NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk.
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Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 50.52% to $67.39 million when compared to the same quarter last year. In addition, LEGACY RESERVES LP has also vastly surpassed the industry average cash flow growth rate of -17.93%.
- The gross profit margin for LEGACY RESERVES LP is rather high; currently it is at 54.96%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, LGCY's net profit margin of 15.13% compares favorably to the industry average.
- LGCY, with its decline in revenue, slightly underperformed the industry average of 10.4%. Since the same quarter one year prior, revenues fell by 12.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, LGCY maintains a poor quick ratio of 0.73, which illustrates the inability to avoid short-term cash problems.
- 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, LEGACY RESERVES LP's return on equity significantly trails that of both the industry average and the S&P 500.
Legacy Reserves LP, an independent oil and natural gas limited partnership, engages in the acquisition and development of oil and natural gas properties primarily located in the Permian Basin, Mid-Continent, and Rocky Mountain regions of the United States. Legacy Reserves has a market cap of $1.54 billion and is part of the basic materials sector and energy industry. Shares are up 12.4% year to date as of the close of trading on Wednesday.
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