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"We rate SANCHEZ ENERGY CORP (SN) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and generally high debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SN'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 56.09%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- Currently the debt-to-equity ratio of 1.62 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 3.16, which shows the ability to cover short-term cash needs.
- 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, SANCHEZ ENERGY CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for SANCHEZ ENERGY CORP is currently very high, coming in at 78.15%. Regardless of SN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SN's net profit margin of 23.64% significantly outperformed against the industry.
- Net operating cash flow has significantly increased by 227.57% to $130.65 million when compared to the same quarter last year. In addition, SANCHEZ ENERGY CORP has also vastly surpassed the industry average cash flow growth rate of 17.50%.
- You can view the full analysis from the report here: SN Ratings Report