Editor's Note: 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 NEW YORK ( TheStreet) -- National Electricity Company of Chile (NYSE: EOC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself.
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- The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that EOC's debt-to-equity ratio is low, the quick ratio, which is currently 0.58, displays a potential problem in covering short-term cash needs.
- EOC, with its decline in revenue, slightly underperformed the industry average of 6.5%. Since the same quarter one year prior, revenues fell by 12.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Independent Power Producers & Energy Traders industry average, but is less than that of the S&P 500. The net income has significantly decreased by 54.6% when compared to the same quarter one year ago, falling from $142.53 million to $64.73 million.
- The gross profit margin for ENDESA-EMPR NAC ELEC (CHILE) is currently lower than what is desirable, coming in at 29.20%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 5.60% is above that of the industry average.
- Net operating cash flow has decreased to $129.80 million or 49.37% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
-- Written by a member of TheStreet Ratings Staff