NEW YORK ( TheStreet) -- Dawson Geophysical Company (Nasdaq: DWSN) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. 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:
- DAWSON GEOPHYSICAL CO 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, DAWSON GEOPHYSICAL CO continued to lose money by earning -$0.42 versus -$1.20 in the prior year. This year, the market expects an improvement in earnings ($2.25 versus -$0.42).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 215.1% when compared to the same quarter one year prior, rising from -$4.86 million to $5.59 million.
- The gross profit margin for DAWSON GEOPHYSICAL CO is rather low; currently it is at 23.80%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.50% trails the industry average.
- DWSN'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 32.52%, 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. 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.
-- Written by a member of TheStreet Ratings Staff