Rating Change #3

UGI Corporation ( UGI) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • UGI's revenue growth trails the industry average of 41.5%. Since the same quarter one year prior, revenues rose by 16.7%. 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.
  • Net operating cash flow has slightly increased to $87.50 million or 6.57% when compared to the same quarter last year. Despite an increase in cash flow of 6.57%, UGI CORP is still growing at a significantly lower rate than the industry average of 57.07%.
  • Even though the current debt-to-equity ratio is 1.16, it is still below the industry average, suggesting that this level of debt is acceptable within the Gas Utilities industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.74 is weak.
  • UGI CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, UGI CORP reported lower earnings of $2.07 versus $2.38 in the prior year. This year, the market expects an improvement in earnings ($2.41 versus $2.07).

UGI Corporation, through its subsidiaries, distributes and markets energy products and related services in the United States and internationally. The company has a P/E ratio of 14.2, equal to the average utilities industry P/E ratio and below the S&P 500 P/E ratio of 17.7. UGI has a market cap of $3.37 billion and is part of the utilities sector and utilities industry. Shares are down 6.1% year to date as of the close of trading on Friday.

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

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