NEW YORK ( TheStreet) -- Spectra Energy Partners (NYSE: SEP) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $61.50 million or 46.77% when compared to the same quarter last year. In addition, SPECTRA ENERGY PARTNERS LP has also modestly surpassed the industry average cash flow growth rate of 38.61%.
  • The gross profit margin for SPECTRA ENERGY PARTNERS LP is rather high; currently it is at 52.80%. Regardless of SEP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SEP's net profit margin of 87.40% significantly outperformed against the industry.
  • Despite currently having a low debt-to-equity ratio of 0.42, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 7.20 is very high and demonstrates very strong liquidity.
  • SPECTRA ENERGY PARTNERS LP's earnings per share declined by 5.3% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, SPECTRA ENERGY PARTNERS LP reported lower earnings of $1.69 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus $1.69).
  • The revenue fell significantly faster than the industry average of 37.3%. Since the same quarter one year prior, revenues slightly dropped by 9.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

Spectra Energy Partners, LP operates as an investment arm of Spectra Energy Corp. The company has a P/E ratio of 17.5, equal to the average energy industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Spectra Energy has a market cap of $2.9 billion and is part of the basic materials sector and energy industry. Shares are down 9.5% year to date as of the close of trading on Tuesday.

You can view the full Spectra Energy Ratings Report or get investment ideas from our investment research center.
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