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) -- AGL Resources (NYSE: GAS) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and generally higher debt management risk.
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- GAS's very impressive revenue growth greatly exceeded the industry average of 7.0%. Since the same quarter one year prior, revenues leaped by 108.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Gas Utilities industry. The net income increased by 400.0% when compared to the same quarter one year prior, rising from -$3.00 million to $9.00 million.
- AGL RESOURCES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AGL RESOURCES INC reported lower earnings of $2.15 versus $3.00 in the prior year. This year, the market expects an improvement in earnings ($2.70 versus $2.15).
- Even though the current debt-to-equity ratio is 1.36, it is still below the industry average, suggesting that this level of debt is acceptable within the Gas Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.30 is very low and demonstrates very weak liquidity.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Gas Utilities industry and the overall market, AGL RESOURCES INC's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff