NEW YORK ( TheStreet) -- FirstEnergy (NYSE: FE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally poor debt management and disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 24.9%. 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.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- FIRSTENERGY 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 reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIRSTENERGY CORP reported lower earnings of $2.13 versus $2.58 in the prior year. This year, the market expects an improvement in earnings ($3.44 versus $2.13).
- The gross profit margin for FIRSTENERGY CORP is currently extremely low, coming in at 4.40%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 2.50% trails that of the industry average.
- Net operating cash flow has decreased to $834.00 million or 16.84% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
-- Written by a member of TheStreet Ratings Staff