NEW YORK ( TheStreet) -- Goodrich Petroleum (NYSE: GDP) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally weak debt management and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 13.1% when compared to the same quarter one year ago, dropping from -$19.72 million to -$22.30 million.
- The debt-to-equity ratio is very high at 3.94 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.28, which clearly demonstrates the inability to cover short-term cash needs.
- Looking at the price performance of GDP's shares over the past 12 months, there is not much good news to report: the stock is down 26.00%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GOODRICH PETROLEUM CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- GOODRICH PETROLEUM CORP's earnings per share declined by 11.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GOODRICH PETROLEUM CORP continued to lose money by earning -$1.05 versus -$7.46 in the prior year. This year, the market expects an improvement in earnings ($0.08 versus -$1.05).
-- Written by a member of TheStreet Ratings Staff