Stone Energy Corp Stock Downgraded (SGY)

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) -- Stone Energy (NYSE: SGY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. 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:
  • The gross profit margin for STONE ENERGY CORP is rather high; currently it is at 65.43%. Regardless of SGY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.17% trails the industry average.
  • SGY, with its decline in revenue, underperformed when compared the industry average of 0.4%. Since the same quarter one year prior, revenues fell by 16.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 88.6% when compared to the same quarter one year ago, falling from $39.02 million to $4.44 million.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, STONE ENERGY CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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