NEW YORK ( TheStreet) -- Baytex Energy (NYSE: BTE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity 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 98.2% when compared to the same quarter one year ago, falling from $51.95 million to $0.95 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BAYTEX ENERGY CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Compared to its closing price of one year ago, BTE's share price has jumped by 61.83%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- Net operating cash flow has increased to $119.90 million or 27.35% when compared to the same quarter last year. In addition, BAYTEX ENERGY CORP has also modestly surpassed the industry average cash flow growth rate of 25.47%.
- BTE's revenue growth trails the industry average of 23.6%. Since the same quarter one year prior, revenues slightly increased by 9.8%. 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.