NEW YORK ( TheStreet) -- Plains Exploration & Production Company (NYSE: PXP) 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, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally poor debt management and disappointing return on equity. Highlights from the ratings report include:
- PXP's revenue growth has slightly outpaced the industry average of 37.4%. Since the same quarter one year prior, revenues rose by 41.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for PLAINS EXPLORATION & PROD CO is currently very high, coming in at 72.30%. It has increased significantly from the same period last year. Along with this, the net profit margin of 24.30% significantly outperformed against the industry average.
- Net operating cash flow has increased to $287.46 million or 13.77% when compared to the same quarter last year. Despite an increase in cash flow, PLAINS EXPLORATION & PROD CO's cash flow growth rate is still lower than the industry average growth rate of 38.65%.
- The debt-to-equity ratio of 1.01 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 0.43, which clearly demonstrates the inability to cover short-term cash needs.
- 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, PLAINS EXPLORATION & PROD CO's return on equity is significantly below that of the industry average and is below that of the S&P 500.