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) -- QR Energy (NYSE: QRE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and weak operating cash flow.
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- The revenue growth came in higher than the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 22.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- QR ENERGY LP 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, QR ENERGY LP turned its bottom line around by earning $0.13 versus -$0.46 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $0.13).
- The debt-to-equity ratio of 1.45 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, QRE maintains a poor quick ratio of 0.79, which illustrates the inability to avoid short-term cash problems.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, QR ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.