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) -- Patterson-UTI Energy (Nasdaq: PTEN) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- PTEN's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.49, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $286.88 million or 30.03% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 16.14%.
- 38.30% is the gross profit margin for PATTERSON-UTI ENERGY INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.89% trails the industry average.
- PTEN, with its decline in revenue, underperformed when compared the industry average of 11.3%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff