This article was updated to correct Pengrowth Energy's price-to-earnings ratio.NEW YORK ( TheStreet) -- Pengrowth Energy (NYSE: PGH) 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, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 34.6%. Since the same quarter one year prior, revenues rose by 33.6%. 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.
- The gross profit margin for PENGROWTH ENERGY CORP is rather high; currently it is at 68.80%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.10% trails the industry average.
- Net operating cash flow has increased to $179.41 million or 12.18% when compared to the same quarter last year. Despite an increase in cash flow, PENGROWTH ENERGY CORP's cash flow growth rate is still lower than the industry average growth rate of 30.41%.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PENGROWTH ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of PENGROWTH ENERGY CORP has not done very well: it is down 18.36% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.