NEW YORK ( TheStreet) -- Pacific Ethanol (Nasdaq: PEIX) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, a generally disappointing performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- The debt-to-equity ratio is very high at 69.88 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, PEIX maintains a poor quick ratio of 0.95, which illustrates the inability to avoid short-term cash problems.
- PEIX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 62.50%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- PACIFIC ETHANOL 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 two years. During the past fiscal year, PACIFIC ETHANOL INC turned its bottom line around by earning $0.93 versus -$5.44 in the prior year.
- PEIX's very impressive revenue growth greatly exceeded the industry average of 23.1%. Since the same quarter one year prior, revenues leaped by 142.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PACIFIC ETHANOL INC's return on equity significantly exceeds that of both the industry average and the S&P 500.