Will This Downgrade Hurt Southwest Gas Corp (SWX) Stock Today?

NEW YORK (TheStreet) -- Southwest Gas Corp (SWX) stock has been downgraded to "hold" from "buy," Brean Murray said Friday. The firm said cold weather has disrupted the business. 

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Separately, TheStreet Ratings team rates SOUTHWEST GAS CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SOUTHWEST GAS CORP (SWX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, 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."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SWX's revenue growth trails the industry average of 26.5%. Since the same quarter one year prior, revenues rose by 10.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $77.67 million or 38.67% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.50%.
  • The debt-to-equity ratio is somewhat low, currently at 0.98, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that SWX'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.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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