NEW YORK (TheStreet) -- Shares of Devon Energy Corp (DVN) are climbing, up 0.03% to $68.23 in midday trading Friday, after hedge fund Third Point disclosed that it took a new position in the independent energy company.
The hedge fund revealed in its first quarter letter to investors that it has initiated a position in Devon Energy, saying it combines limited downside with an under-appreciated, valuable asset base.
Third Point added that it is encouraging Devon's management to streamline its portfolio.
Oklahoma City-based Devon Energy is an independent energy company engaged in the exploration, development and production of oil, natural gas and natural gas liquids.
The company holds 14 million net acres, of which roughly 60% are undeveloped.
Separately, TheStreet Ratings team rates DEVON ENERGY CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DEVON ENERGY CORP (DVN) 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, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DVN's very impressive revenue growth greatly exceeded the industry average of 20.3%. Since the same quarter one year prior, revenues leaped by 128.5%. 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 current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that DVN's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.
- Net operating cash flow has decreased to $963.00 million or 32.98% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 297.1% when compared to the same quarter one year ago, falling from $207.00 million to -$408.00 million.
- You can view the full analysis from the report here: DVN Ratings Report