CGG Veritas Stock Upgraded (CGV)

NEW YORK ( TheStreet) -- CGG Veritas (NYSE: CGV) has been upgraded by TheStreet Ratings from sell 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 relatively poor performance when compared with the S&P 500 during the past year and weak operating cash flow.

Highlights from the ratings report include:
  • CGG VERITAS 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CGG VERITAS continued to lose money by earning -$0.18 versus -$0.47 in the prior year. This year, the market expects an improvement in earnings ($1.38 versus -$0.18).
  • 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 169.8% when compared to the same quarter one year prior, rising from -$42.11 million to $29.40 million.
  • 39.30% is the gross profit margin for CGG VERITAS which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.50% trails the industry average.
  • Net operating cash flow has decreased to $103.60 million or 38.38% when compared to the same quarter last year. Despite a decrease in cash flow of 38.38%, CGG VERITAS is in line with the industry average cash flow growth rate of -46.99%.
  • In its most recent trading session, CGV has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.

Compagnie Generale de Geophysique Veritas, S.A. engages in the provision of geophysical equipment and geophysical services for the oil and gas exploration and production industry in North America, Central and South Americas, Europe, Africa, the Middle East, and the Asia Pacific. CGG Veritas has a market cap of $4.23 billion and is part of the basic materials sector and energy industry. Shares are up 20.1% year to date as of the close of trading on Monday.

You can view the full CGG Veritas Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.