Magellan Petroleum Corporation Stock Upgraded (MPET)

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) -- Magellan Petroleum Corporation (Nasdaq: MPET) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. 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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Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 229.1% when compared to the same quarter one year prior, rising from -$26.87 million to $34.71 million.
  • MPET's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 5.66, which clearly demonstrates the ability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, MAGELLAN PETROLEUM CORP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • MAGELLAN PETROLEUM CORP 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MAGELLAN PETROLEUM CORP turned its bottom line around by earning $0.49 versus -$0.61 in the prior year. For the next year, the market is expecting a contraction of 130.6% in earnings (-$0.15 versus $0.49).
  • MPET has underperformed the S&P 500 Index, declining 15.97% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
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Magellan Petroleum Corporation, together with its subsidiaries, engages in the exploration for, development, production, and sale of oil and gas reserves in Australia, the United States, Canada, and the United Kingdom. The company has a P/E ratio of 2.1, equal to the average energy industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Magellan has a market cap of $56.6 million and is part of the basic materials sector and energy industry. Shares are up 8.5% year to date as of the close of trading on Tuesday.

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

-- Written by a member of TheStreet Ratings Staff

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.

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