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. TheStreet Ratings quantitative algorithm evaluates over 4,300 stocks on a daily basis by 32 different data factors and assigns a unique buy, sell, or hold recommendation on each stock. Click here to learn more.
NEW YORK (TheStreet) -- Bonanza Creek Energy (BCEI) has been downgraded by TheStreet Ratings from Buy to Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate BONANZA CREEK ENERGY INC (BCEI) 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 robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself."
Must Read: Warren Buffett's 25 Favorite Stocks
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BCEI's revenue growth has slightly outpaced the industry average of 15.4%. Since the same quarter one year prior, revenues rose by 24.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- BONANZA CREEK ENERGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, BONANZA CREEK ENERGY INC increased its bottom line by earning $1.72 versus $1.11 in the prior year. This year, the market expects an improvement in earnings ($1.85 versus $1.72).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, BONANZA CREEK ENERGY INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- BCEI's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 40.17%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The debt-to-equity ratio of 1.04 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, BCEI maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: BCEI Ratings Report