NEW YORK ( TheStreet) -- TransAlta Corporation (NYSE: TAC) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally weak debt management, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
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- 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 5373.3% when compared to the same quarter one year ago, falling from $15.00 million to -$791.00 million.
- Currently the debt-to-equity ratio of 1.75 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 0.46, 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 Independent Power Producers & Energy Traders industry and the overall market, TRANSALTA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $78.00 million or 45.83% when compared to the same quarter last year. Despite a decrease in cash flow of 45.83%, TRANSALTA CORP is in line with the industry average cash flow growth rate of -49.32%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.59%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 7120.00% compared to the year-earlier 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