NEW YORK ( TheStreet) -- Legacy Reserves (Nasdaq: LGCY) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share, increase in net income, revenue growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated. Highlights from the ratings report include:
- The gross profit margin for LEGACY RESERVES LP is currently very high, coming in at 77.30%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 51.30% significantly outperformed against the industry average.
- Despite its growing revenue, the company underperformed as compared with the industry average of 43.9%. Since the same quarter one year prior, revenues rose by 42.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 66.9% when compared to the same quarter one year prior, rising from $39.45 million to $65.85 million.
- LEGACY RESERVES LP 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. 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 ($1.69 versus $0.29).
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.