Exterran Holdings Inc Stock Downgraded (EXH)

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) -- Exterran Holdings (NYSE: EXH) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, solid stock price performance and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.

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Highlights from the ratings report include:
  • 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 29.6% when compared to the same quarter one year prior, rising from $9.34 million to $12.10 million.
  • Compared to its closing price of one year ago, EXH's share price has jumped by 35.92%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The gross profit margin for EXTERRAN HOLDINGS INC is currently lower than what is desirable, coming in at 34.63%. Regardless of EXH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, EXH's net profit margin of 1.63% is significantly lower than the industry average.
  • The debt-to-equity ratio of 1.05 is relatively high when compared with the industry average, suggesting a need for better debt level management.

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