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"We rate TESCO CORP (TESO) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 15.9%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- TESO's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.70, which clearly demonstrates the ability to cover short-term cash needs.
- TESCO CORP's earnings per share declined by 37.9% 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TESCO CORP reported lower earnings of $0.91 versus $1.28 in the prior year. This year, the market expects an improvement in earnings ($0.92 versus $0.91).
- The gross profit margin for TESCO CORP is currently lower than what is desirable, coming in at 27.67%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.27% trails that of the industry average.
- Net operating cash flow has decreased to $16.91 million or 28.30% 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.
- You can view the full analysis from the report here: TESO Ratings Report
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