NEW YORK (TheStreet) -- Northwest Natural Gas (NWN) stock has been downgraded to "hold" from "buy," McAdams Wright Ragen said Tuesday. The firm said the revision was a valuation call as the stock is trading at 21x expected earnings.
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Separately, TheStreet Ratings team rates NORTHWEST NATURAL GAS CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate NORTHWEST NATURAL GAS CO (NWN) 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, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth significantly trails the industry average of 36.0%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- Net operating cash flow has significantly increased by 107.44% to $220.13 million when compared to the same quarter last year. In addition, NORTHWEST NATURAL GAS CO has also vastly surpassed the industry average cash flow growth rate of 14.94%.
- NORTHWEST NATURAL GAS CO reported flat earnings per share in the most recent quarter. 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, NORTHWEST NATURAL GAS CO increased its bottom line by earning $2.24 versus $2.18 in the prior year. This year, the market expects an improvement in earnings ($2.27 versus $2.24).
- 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.
- The debt-to-equity ratio is somewhat low, currently at 0.99, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.32 is very weak and demonstrates a lack of ability to pay short-term obligations.
- You can view the full analysis from the report here: NWN Ratings Report