Questar Corp Stock Downgraded (STR)

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) -- Questar (NYSE: STR) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and weak operating cash flow.

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Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.0%. Since the same quarter one year prior, revenues slightly increased by 2.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for QUESTAR CORP is currently very high, coming in at 82.31%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.01% significantly outperformed against the industry average.
  • QUESTAR CORP's earnings per share improvement from the most recent quarter was slightly positive. 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, QUESTAR CORP reported lower earnings of $0.91 versus $1.19 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $0.91).
  • Net operating cash flow has decreased to $70.90 million or 46.12% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio of 1.15 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.22, which clearly demonstrates the inability to cover short-term cash needs.

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