NEW YORK ( TheStreet) -- Calpine (NYSE: CPN) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally weak debt management, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- The debt-to-equity ratio is very high at 2.42 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, CPN maintains a poor quick ratio of 0.92, which illustrates the inability to avoid short-term cash problems.
- 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 Independent Power Producers & Energy Traders industry and the overall market, CALPINE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CALPINE CORP is currently lower than what is desirable, coming in at 26.50%. Regardless of CPN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.90% trails the industry average.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Independent Power Producers & Energy Traders industry average, but is greater than that of the S&P 500. The net income increased by 45.8% when compared to the same quarter one year prior, rising from -$24.00 million to -$13.00 million.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.7%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
-- Written by a member of TheStreet Ratings Staff