Magnum Hunter Resources Corporation Stock Downgraded (MHR)

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) -- Magnum Hunter Resources Corporation (NYSE: MHR) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity and weak operating cash flow.

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Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 39.4% when compared to the same quarter one year ago, falling from -$44.20 million to -$61.59 million.
  • The debt-to-equity ratio of 1.40 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, MHR has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MAGNUM HUNTER RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $3.88 million or 95.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 42.80% is the gross profit margin for MAGNUM HUNTER RESOURCES CORP which we consider to be strong. Regardless of MHR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MHR's net profit margin of -59.23% significantly underperformed when compared to the industry average.

Magnum Hunter Resources Corporation, an independent oil and natural gas company, explores for, exploits, acquires, develops, and produces crude oil, natural gas, and natural gas liquid resources in the United States. Magnum Hunter has a market cap of $1.26 billion and is part of the basic materials sector and energy industry. Shares are down 13.5% year to date as of the close of trading on Wednesday.

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

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