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) -- Calpine (NYSE: CPN) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, poor profit margins and generally high debt management risk.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- Net operating cash flow has significantly decreased to $45.00 million or 81.17% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The gross profit margin for CALPINE CORP is rather low; currently it is at 19.50%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 7.31% is above that of the industry average.
- The debt-to-equity ratio is very high at 2.69 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, CPN's quick ratio is somewhat strong at 1.45, demonstrating the ability to handle short-term liquidity needs.
- CPN, with its decline in revenue, underperformed when compared the industry average of 7.6%. Since the same quarter one year prior, revenues slightly dropped by 6.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, CALPINE CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff