NEW YORK (
-- Pengrowth Energy
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.
Highlights from the ratings report include:
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 96.2% when compared to the same quarter one year ago, falling from $50.52 million to $1.94 million.
- Net operating cash flow has declined marginally to $137.78 million or 8.10% when compared to the same quarter last year. Despite a decrease in cash flow of 8.10%, PENGROWTH ENERGY CORP is in line with the industry average cash flow growth rate of -8.15%.
- The gross profit margin for PENGROWTH ENERGY CORP is rather high; currently it is at 50.20%. Regardless of PGH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.80% trails the industry average.
- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that PGH's debt-to-equity ratio is low, the quick ratio, which is currently 0.65, displays a potential problem in covering short-term cash needs.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite 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.
Pengrowth Energy Corporation, through its subsidiary, Pengrowth Corporation, engages in the acquisition, ownership, and operation of working and royalty interests in oil and natural gas properties primarily in the Western Canadian Sedimentary Basin. The company has a P/E ratio of 18, above the average energy industry P/E ratio of 17.9 and above the S&P 500 P/E ratio of 16. Pengrowth Energy has a market cap of $4.5 billion and is part of the
industry. Shares are up 7.9% year to date as of the close of trading on Wednesday.
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