Despite the prospect of rising interest rates, the firm views Questar as a solid long-term investment offering an attractive current yield of 4%, Jefferies added.
However, Questar shares have fared much worse, declining more than 11% amid decelerating Wexpro growth, Jefferies noted.
"Overall, sentiment on Questar is poor and nothing is being ascribed for the company's upside opportunities so we see muted downside risk and a longer-term upside skew," Jefferies analysts said.
Questar is an integrated natural gas holding company that develops, produces and delivers clean energy in the Rockies, North America.
Shares of Questar are rising 2.26% to $21.70 in morning trading Wednesday.
Separately, TheStreet Ratings team rates QUESTAR CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate QUESTAR CORP (STR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Gas Utilities industry and the overall market, QUESTAR CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for QUESTAR CORP is rather high; currently it is at 53.83%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.73% is above that of the industry average.
- Net operating cash flow has slightly increased to $223.40 million or 4.93% when compared to the same quarter last year. Despite an increase in cash flow, QUESTAR CORP's cash flow growth rate is still lower than the industry average growth rate of 23.83%.
- Despite the weak revenue results, STR has outperformed against the industry average of 20.2%. Since the same quarter one year prior, revenues slightly dropped by 6.2%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- QUESTAR CORP reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, QUESTAR CORP increased its bottom line by earning $1.28 versus $0.91 in the prior year. This year, the market expects earnings to be in line with last year ($1.28 versus $1.28).
- You can view the full analysis from the report here: STR Ratings Report