Apache Corporation Stock Hold Recommendation Reiterated (APA)

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) -- Apache Corporation (NYSE: APA) has been reiterated by TheStreet Ratings as a hold with a ratings score of C+ . The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

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Highlights from the ratings report include:
  • APA's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for APACHE CORP is currently very high, coming in at 74.50%. Regardless of APA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, APA's net profit margin of 15.20% compares favorably to the industry average.
  • Despite currently having a low debt-to-equity ratio of 0.36, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 43.8% when compared to the same quarter one year ago, falling from $1,189.00 million to $668.00 million.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, APACHE CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

Apache Corporation, an independent energy company, explores for, develops, and produces natural gas, crude oil, and natural gas liquids. Apache has a market cap of $28.54 billion and is part of the basic materials sector and energy industry. The company has a P/E ratio of 14.8, below the S&P 500 P/E ratio of 17.7. Shares are down 6.3% year to date as of the close of trading on Wednesday.

You can view the full Apache Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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