NEW YORK ( TheStreet) -- Contango Oil & Gas Company (AMEX: MCF) has been upgraded by TheStreet Ratings from hold to buy. Among the primary strengths of the company is its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The gross profit margin for CONTANGO OIL & GAS CO is currently very high, coming in at 86.20%. Regardless of MCF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCF's net profit margin of 35.50% significantly outperformed against the industry.
- CONTANGO OIL & GAS CO's earnings per share declined by 9.4% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, CONTANGO OIL & GAS CO increased its bottom line by earning $4.09 versus $3.10 in the prior year.
- The revenue fell significantly faster than the industry average of 11.9%. Since the same quarter one year prior, revenues fell by 20.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, MCF has underperformed the S&P 500 Index, declining 6.88% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- 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 12.6% when compared to the same quarter one year ago, dropping from $16.80 million to $14.67 million.
-- Written by a member of TheStreet RatingsStaff