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) -- Callon Petroleum (NYSE: CPE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and generally higher debt management risk.
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- 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CALLON PETROLEUM CO/DE's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for CALLON PETROLEUM CO/DE is currently very high, coming in at 78.60%. Regardless of CPE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CPE's net profit margin of -4.00% significantly underperformed when compared to the industry average.
- 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 113.1% when compared to the same quarter one year ago, falling from $8.40 million to -$1.11 million.
- Net operating cash flow has decreased to $14.25 million or 48.15% 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