NEW YORK ( TheStreet) -- Patterson-UTI Energy (Nasdaq: PTEN) 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, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
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- The revenue growth came in higher than the industry average of 14.4%. Since the same quarter one year prior, revenues rose by 31.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- PTEN's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.30, which illustrates the ability to avoid short-term cash problems.
- 39.40% is the gross profit margin for PATTERSON-UTI ENERGY INC which we consider to be strong. Regardless of PTEN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PTEN's net profit margin of 13.00% compares favorably to the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Energy Equipment & Services industry and the overall market, PATTERSON-UTI ENERGY INC's return on equity is below that of both the industry average and the S&P 500.
- PTEN'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 49.59%, 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