NEW YORK (TheStreet) -- Shares of SandRidge Energy (SD) - Get Report were gaining 6.5% to $2.04 Tuesday after the oil and gas company announced the mandatory conversion of $200 million of its 6% convertible perpetual preferred stock sold in 2009.
Each share of convertible preferred stock automatically converted to 9.211496 shares of common stock of SandRidge Energy on Dec. 21, 2014, as per the certificate of designation that governs the terms of the convertible preferred stock.
The dividends on the convertible preferred stock stopped accruing on Dec. 21.
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Oil prices were also rebounding Tuesday morning, which may have contributed to SandRidge's gains. WTI crude oil for February delivery were gaining 1.1% to $55.89 a barrel Tuesday morning, and Brent crude oil for February delivery was gaining 0.6% to $60.46 a barrel.
TheStreet Ratings team rates SANDRIDGE ENERGY INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate SANDRIDGE ENERGY INC (SD) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has decreased by 19.6% when compared to the same quarter one year ago, dropping from -$20.44 million to -$24.44 million.
- Net operating cash flow has decreased to $140.34 million or 46.68% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Currently the debt-to-equity ratio of 1.93 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, SD has managed to keep a strong quick ratio of 1.77, which demonstrates the ability to cover short-term cash needs.
- Looking at the price performance of SD's shares over the past 12 months, there is not much good news to report: the stock is down 66.67%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier 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.
- SANDRIDGE ENERGY INC's earnings per share declined by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SANDRIDGE ENERGY INC reported poor results of -$1.27 versus -$0.14 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus -$1.27).
- You can view the full analysis from the report here: SD Ratings Report