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) -- Tesoro Logistics (NYSE: TLLP) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share and compelling growth in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.
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- TLLP's very impressive revenue growth greatly exceeded the industry average of 8.6%. Since the same quarter one year prior, revenues leaped by 82.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- TESORO LOGISTICS LP has improved earnings per share by 5.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TESORO LOGISTICS LP increased its bottom line by earning $1.69 versus $1.11 in the prior year. This year, the market expects an improvement in earnings ($2.41 versus $1.69).
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 89.11% over the past year, a rise that has exceeded that of the S&P 500 Index. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- TLLP's debt-to-equity ratio of 0.94 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.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, TESORO LOGISTICS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff