NEW YORK ( TheStreet) -- Southwestern Energy Company (NYSE: SWN) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue 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:
- SOUTHWESTERN ENERGY CO has improved earnings per share by 8.7% 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, SOUTHWESTERN ENERGY CO turned its bottom line around by earning $1.73 versus -$0.12 in the prior year. This year, the market expects an improvement in earnings ($1.85 versus $1.73).
- SWN's revenue growth trails the industry average of 35.9%. Since the same quarter one year prior, revenues rose by 12.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has slightly increased to $443.28 million or 9.18% when compared to the same quarter last year. Despite an increase in cash flow, SOUTHWESTERN ENERGY CO's cash flow growth rate is still lower than the industry average growth rate of 29.18%.
- 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, SOUTHWESTERN ENERGY CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- SWN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 25.38%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, SWN is still more expensive than most of the other companies in its industry.