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) -- Stone Energy Corporation (NYSE: SGY) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- The revenue growth came in higher than the industry average of 2.9%. Since the same quarter one year prior, revenues rose by 14.9%. 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 STONE ENERGY CORP is currently very high, coming in at 72.30%. Regardless of SGY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SGY's net profit margin of 17.36% compares favorably to the industry average.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 2.8% when compared to the same quarter one year ago, dropping from $45.52 million to $44.25 million.
- The debt-to-equity ratio of 1.05 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, SGY has managed to keep a strong quick ratio of 2.08, which demonstrates the ability to cover short-term cash needs.
-- Written by a member of TheStreet Ratings Staff