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) -- Inergy L.P (NYSE: NRGY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk.
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- 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 1175.7% when compared to the same quarter one year prior, rising from -$50.20 million to $540.00 million.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, INERGY LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for INERGY LP is currently lower than what is desirable, coming in at 32.80%. Regardless of NRGY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NRGY's net profit margin of 177.51% significantly outperformed against the industry.
- NRGY has underperformed the S&P 500 Index, declining 19.81% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- NRGY's debt-to-equity ratio of 0.71 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that NRGY's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.56 is low and demonstrates weak liquidity.
-- Written by a member of TheStreet Ratings Staff