The firm maintained its "hold" rating on the stock despite the increased price target on the independent energy company's shares.
"HK has built positions in two of the leading liquids-rich resource plays in the US, the Williston Basin (WB) and El Halcon, its Eagle Ford (EF) play. The Tuscaloosa Marine Shale (TMS) has been established as a third core area; the new partnership should speed development there," said analysts.
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TheStreet Ratings team rates HALCON RESOURCES CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate HALCON RESOURCES CORP (HK) 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 robust revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 44.1%. 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.
- Compared to its closing price of one year ago, HK's share price has jumped by 30.99%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The gross profit margin for HALCON RESOURCES CORP is rather high; currently it is at 52.65%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, HK's net profit margin of -26.61% significantly underperformed when compared to the industry average.
- The debt-to-equity ratio is very high at 2.56 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, HALCON RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: HK Ratings Report