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) -- Piedmont Natural Gas Company (NYSE: PNY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, generally higher debt management risk and poor profit margins.
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- PIEDMONT NATURAL GAS CO 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PIEDMONT NATURAL GAS CO increased its bottom line by earning $1.66 versus $1.57 in the prior year. This year, the market expects an improvement in earnings ($1.76 versus $1.66).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Gas Utilities industry. The net income increased by 50.3% when compared to the same quarter one year prior, rising from -$4.61 million to -$2.29 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Gas Utilities industry and the overall market on the basis of return on equity, PIEDMONT NATURAL GAS CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Even though the current debt-to-equity ratio is 1.23, it is still below the industry average, suggesting that this level of debt is acceptable within the Gas Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.10 is very low and demonstrates very weak liquidity.
- Net operating cash flow has decreased to $17.65 million or 18.56% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.