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"We rate SM ENERGY CO (SM) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, good cash flow from operations, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 21.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for SM ENERGY CO is currently very high, coming in at 72.70%. It has increased significantly from the same period last year. Along with this, the net profit margin of 8.88% is above that of the industry average.
- Net operating cash flow has increased to $415.43 million or 32.27% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.00%.
- SM ENERGY CO's earnings per share declined by 22.1% in the most recent quarter compared to the same quarter a year ago. 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, SM ENERGY CO turned its bottom line around by earning $2.52 versus -$0.84 in the prior year. This year, the market expects an improvement in earnings ($6.74 versus $2.52).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: SM Ratings Report
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