NEW YORK ( TheStreet) -- Legacy Reserves (Nasdaq: LGCY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and generally poor debt management. 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 690.7% when compared to the same quarter one year ago, falling from $10.22 million to -$60.37 million.
- The debt-to-equity ratio of 1.10 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.45, which clearly demonstrates the inability to cover short-term cash needs.
- LEGACY RESERVES LP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LEGACY RESERVES LP turned its bottom line around by earning $0.29 versus -$2.85 in the prior year. This year, the market expects an improvement in earnings ($1.65 versus $0.29).
- The gross profit margin for LEGACY RESERVES LP is currently very high, coming in at 1132.80%. It has increased significantly from the same period last year. Along with this, the net profit margin of 2245.90% significantly outperformed against the industry average.
- Compared to its closing price of one year ago, LGCY's share price has jumped by 36.65%, 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.