NEW YORK ( TheStreet) -- Crosstex Energy (Nasdaq: XTXI) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally poor debt management and poor profit margins. 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 117.3% when compared to the same quarter one year ago, falling from $12.10 million to -$2.09 million.
- The debt-to-equity ratio is very high at 4.07 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, XTXI maintains a poor quick ratio of 0.89, which illustrates the inability to avoid short-term cash problems.
- XTXI, with its decline in revenue, underperformed when compared the industry average of 12.1%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- CROSSTEX ENERGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CROSSTEX ENERGY INC continued to lose money by earning -$0.24 versus -$0.52 in the prior year. This year, the market expects an improvement in earnings (-$0.21 versus -$0.24).
- 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. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.