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) -- Huaneng Power International (NYSE: HNP) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been very high debt management risk by most measures.
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- The debt-to-equity ratio is very high at 2.80 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Independent Power Producers & Energy Traders industry average, but is greater than that of the S&P 500. The net income increased by 168.6% when compared to the same quarter one year prior, rising from $188.02 million to $504.98 million.
- HNP's revenue growth trails the industry average of 15.7%. Since the same quarter one year prior, revenues slightly increased by 1.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- This stock has increased by 42.70% over the past year, outperforming the rise in the S&P 500 Index during the same period. Despite the fact that the stock's value has already enjoyed nice gains in the past year, we feel that the risks surrounding an investment in this stock outweigh any potential future returns.
- HUANENG POWER INTERNATIONAL reported significant earnings per share improvement 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, HUANENG POWER INTERNATIONAL increased its bottom line by earning $2.53 versus $0.53 in the prior year. This year, the market expects an improvement in earnings ($5.41 versus $2.53).