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) -- Entergy (NYSE: ETR) has been downgraded by TheStreet Ratings from buy to hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
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- 35.10% is the gross profit margin for ENTERGY CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.60% is above that of the industry average.
- ETR, with its decline in revenue, underperformed when compared the industry average of 13.1%. Since the same quarter one year prior, revenues fell by 12.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ENTERGY CORP's earnings per share declined by 46.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ENTERGY CORP increased its bottom line by earning $7.54 versus $6.65 in the prior year. For the next year, the market is expecting a contraction of 27.1% in earnings ($5.50 versus $7.54).
- The debt-to-equity ratio of 1.37 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.41, which clearly demonstrates the inability to cover short-term cash needs.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Electric Utilities industry and the overall market, ENTERGY CORP'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