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) -- TransGlobe Energy Corporation (Nasdaq: TGA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.
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- The revenue growth came in higher than the industry average of 10.5%. Since the same quarter one year prior, revenues slightly increased by 3.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TGA's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 7.02, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for TRANSGLOBE ENERGY CORP is currently very high, coming in at 81.70%. Regardless of TGA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TGA's net profit margin of 31.34% significantly outperformed against the industry.
- TGA has underperformed the S&P 500 Index, declining 24.56% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, TRANSGLOBE ENERGY CORP 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