Why Basic Energy Services (BAS) Stock Is Down Today

NEW YORK (TheStreet) -- Basic Energy Services (BAS) stock is slipping on Tuesday after announcing the commencement of a secondary public offering of 6 million shares of common stock on behalf of selling shareholder DLJ Merchant Banking Partners III and related funds. 

Goldman Sachs, underwriter for the offering, will likely also be granted a 30-day greenshoe option to purchase up to 900,000 additional shares. Basic Energy will not receive any proceeds from the sale. 

By midmorning, shares had dropped 5.1% to $26.34. Trading volume of 1.4 million shares had exceeded its three-month daily average. 

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TheStreet Ratings team rates BASIC ENERGY SERVICES INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate BASIC ENERGY SERVICES INC (BAS) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and generally higher debt management risk."

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

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 78.3% when compared to the same quarter one year prior, rising from -$8.78 million to -$1.91 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.2%. Since the same quarter one year prior, revenues rose by 10.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • BASIC ENERGY SERVICES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, BASIC ENERGY SERVICES INC swung to a loss, reporting -$0.89 versus $0.45 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus -$0.89).
  • The gross profit margin for BASIC ENERGY SERVICES INC is currently lower than what is desirable, coming in at 31.06%. Regardless of BAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, BAS's net profit margin of -0.56% significantly underperformed when compared to the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, BASIC ENERGY SERVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.
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