NEW YORK ( TheStreet) -- Quicksilver Resources (NYSE: KWK) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally weak debt management, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- Currently the debt-to-equity ratio of 1.58 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.29, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, QUICKSILVER RESOURCES INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- KWK'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 73.03%, 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.
- QUICKSILVER RESOURCES INC has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, QUICKSILVER RESOURCES INC reported lower earnings of $0.50 versus $2.44 in the prior year. For the next year, the market is expecting a contraction of 132.0% in earnings (-$0.16 versus $0.50).
- The revenue fell significantly faster than the industry average of 11.9%. Since the same quarter one year prior, revenues fell by 31.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
-- Written by a member of TheStreet Ratings Staff