NEW YORK ( TheStreet) -- Warren Resources (Nasdaq: WRES) 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 generally poor debt management. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 22.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- WARREN RESOURCES INC 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, WARREN RESOURCES INC increased its bottom line by earning $0.30 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus $0.30).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, WARREN RESOURCES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- WRES'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 43.35%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Despite currently having a low debt-to-equity ratio of 0.57, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that WRES's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.61 is low and demonstrates weak liquidity.
-- Written by a member of TheStreet Ratings Staff