NEW YORK ( TheStreet) -- Forest Oil (NYSE: FST) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally weak debt management, disappointing return on equity and generally disappointing historical performance in the stock itself.
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- FOREST OIL CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, FOREST OIL CORP reported lower earnings of $0.86 versus $1.68 in the prior year. For the next year, the market is expecting a contraction of 57.5% in earnings ($0.37 versus $0.86).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 1427.0% when compared to the same quarter one year ago, falling from $38.52 million to -$511.17 million.
- The debt-to-equity ratio is very high at 2.79 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.19, 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, FOREST OIL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 73.66%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1807.69% compared to the year-earlier 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.
-- Written by a member of TheStreet Ratings Staff