TransGlobe Energy Corp Stock Downgraded (TGA)

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) -- TransGlobe Energy (Nasdaq: TGA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

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Highlights from the ratings report include:
  • TGA's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 7.59, which clearly demonstrates the ability to cover short-term cash needs.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.1%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, TRANSGLOBE ENERGY CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has significantly decreased to $3.21 million or 93.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

TransGlobe Energy Corporation is engaged in the exploration, development, and production of oil and gas properties. It operates in two segments, the Arab Republic of Egypt and the Republic of Yemen. TransGlobe Energy has a market cap of $537.9 million and is part of the basic materials sector and energy industry. Shares are down 13.9% year to date as of the close of trading on Wednesday.

You can view the full TransGlobe Energy Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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