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) -- Sanchez Energy (NYSE: SN) has been downgraded by TheStreet Ratings from hold to sell. The area that we feel has been the company's primary weakness has been its disappointing return on equity.
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- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SANCHEZ ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- SN's debt-to-equity ratio of 0.68 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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.58 is very high and demonstrates very strong liquidity.
- Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- SANCHEZ ENERGY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SANCHEZ ENERGY CORP swung to a loss, reporting -$0.55 versus $0.02 in the prior year. This year, the market expects an improvement in earnings ($1.18 versus -$0.55).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 156.8% when compared to the same quarter one year prior, rising from -$15.65 million to $8.89 million.