NEW YORK ( TheStreet) -- Calpine (NYSE: CPN) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Independent Power Producers & Energy Traders industry. The net income increased by 97.0% when compared to the same quarter one year prior, rising from -$297.00 million to -$9.00 million.
- 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. Although other factors naturally played a role, the company's strong earnings growth was key. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- Net operating cash flow has significantly decreased to $71.00 million or 52.34% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 2.44 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 0.71, which illustrates the inability to avoid short-term cash problems.
-- Written by a member of TheStreet RatingsStaff