Legacy Reserves LP Stock Downgraded (LGCY)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Legacy Reserves (Nasdaq: LGCY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 50.52% to $67.39 million when compared to the same quarter last year. In addition, LEGACY RESERVES LP has also vastly surpassed the industry average cash flow growth rate of -15.97%.
  • The gross profit margin for LEGACY RESERVES LP is rather high; currently it is at 54.96%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, LGCY's net profit margin of 15.13% compares favorably to the industry average.
  • LGCY, with its decline in revenue, slightly underperformed the industry average of 6.6%. Since the same quarter one year prior, revenues fell by 12.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, LGCY maintains a poor quick ratio of 0.73, which illustrates the inability to avoid short-term cash problems.
  • 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, LEGACY RESERVES LP's return on equity significantly trails that of both the industry average and the S&P 500.

Legacy Reserves LP, an independent oil and natural gas limited partnership, engages in the acquisition and development of oil and natural gas properties primarily located in the Permian Basin, Mid-Continent, and Rocky Mountain regions of the United States. Legacy Reserves has a market cap of $1.56 billion and is part of the basic materials sector and energy industry. Shares are up 14% year to date as of the close of trading on Friday.

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

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more..

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

More from Markets

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Jim Cramer: The 10-Year Yield Could Go to 2.75%

Jim Cramer: The 10-Year Yield Could Go to 2.75%

Oil Slumps, Gas Spikes Ahead of Holiday Weekend; Assessing the Chipmakers--ICYMI

Oil Slumps, Gas Spikes Ahead of Holiday Weekend; Assessing the Chipmakers--ICYMI

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%