NEW YORK ( TheStreet) -- Weatherford International (NYSE: WFT) 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, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 14.9%. Since the same quarter one year prior, revenues rose by 26.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- WEATHERFORD INTERNATIONAL 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 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, WEATHERFORD INTERNATIONAL turned its bottom line around by earning $0.34 versus -$0.20 in the prior year. This year, the market expects an improvement in earnings ($1.24 versus $0.34).
- WFT's debt-to-equity ratio of 0.80 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.77 is weak.
- The gross profit margin for WEATHERFORD INTERNATIONAL is rather low; currently it is at 20.30%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 3.40% trails that of the industry average.
- WFT'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 33.88%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
-- Written by a member of TheStreet Ratings Staff