NEW YORK ( TheStreet) -- Apache Corporation (NYSE: APA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity. Highlights from the ratings report include:
- APA's revenue growth has slightly outpaced the industry average of 37.4%. Since the same quarter one year prior, revenues rose by 46.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- APACHE CORP has improved earnings per share by 25.3% 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, APACHE CORP turned its bottom line around by earning $8.50 versus -$0.92 in the prior year. This year, the market expects an improvement in earnings ($11.75 versus $8.50).
- Although APA's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.80 is somewhat weak and could be cause for future problems.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, APACHE CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- APA has underperformed the S&P 500 Index, declining 16.18% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.