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"We rate HOLLYFRONTIER CORP (HFC) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 112.7% when compared to the same quarter one year prior, rising from $82.29 million to $175.01 million.
- HFC's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.1%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- HFC has underperformed the S&P 500 Index, declining 6.10% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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, HOLLYFRONTIER CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: HFC Ratings Report