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, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
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Highlights from the ratings report include:
- Net operating cash flow has slightly increased to $36.99 million or 9.52% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.22%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- 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. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, OTTER TAIL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electric Utilities industry. The net income has significantly decreased by 192.2% when compared to the same quarter one year ago, falling from $18.83 million to -$17.36 million.
Otter Tail Corporation engages in electric and nonelectric operations in the United States and internationally. It operates in six segments: Electric, Plastics, Manufacturing, Health Services, Food Ingredient Processing, and Other Business Operations. The company has a P/E ratio of 34.9, above the S&P 500 P/E ratio of 17.7. Otter Tail has a market cap of $844.4 million and is part of the
industry. Shares are up 6% year to date as of the close of trading on Tuesday.
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-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.