NEW YORK ( TheStreet) -- PAA Natural Gas Storage L.P (NYSE: PNG) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- PNG'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 25.87%, 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, PNG is still more expensive than most of the other companies in its industry.
- The gross profit margin for PAA NATURAL GAS STORAGE LP is rather low; currently it is at 20.50%. It has decreased significantly from the same period last year. Regardless of the weak results of the gross profit margin, the net profit margin of 13.90% is above that of the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PAA NATURAL GAS STORAGE LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels.
- PAA NATURAL GAS STORAGE LP reported significant earnings per share improvement 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PAA NATURAL GAS STORAGE LP increased its bottom line by earning $0.83 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($0.92 versus $0.83).
-- Written by a member of TheStreet Ratings Staff