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 upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- The gross profit margin for APACHE CORP is rather high; currently it is at 69.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.29% is above that of the industry average.
- Net operating cash flow has increased to $2,621.00 million or 30.59% when compared to the same quarter last year. In addition, APACHE CORP has also vastly surpassed the industry average cash flow growth rate of -25.48%.
- The current debt-to-equity ratio, 0.39, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that APA's debt-to-equity ratio is low, the quick ratio, which is currently 0.60, displays a potential problem in covering short-term cash needs.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.5%. Since the same quarter one year prior, revenues slightly dropped by 7.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- APACHE CORP's earnings per share declined by 12.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, APACHE CORP reported lower earnings of $4.91 versus $11.51 in the prior year. This year, the market expects an improvement in earnings ($8.48 versus $4.91).
-- Written by a member of TheStreet Ratings Staff