NEW YORK (TheStreet) -- Shares of Jones Energy (JONE) were falling 11.5% to $10.05 on heavy trading volume Thursday after the oil company priced the 5 million shares of Class A common stock sold by Metalmark Capital in a secondary offering.
Jones Energy priced the 5 million shares sold by Metalmark Capital at $10 a share. The underwriters of the offering have a 30-day option to buy an additional 750,000 shares Class A common stock from the selling shareholders.
The offering is expected to close on May 19, 2015. Jones Energy won't receive any proceeds from the second offering, as it is not selling shares.
About 2.5 million shares of Jones Energy were traded by 11:23 a.m. Thursday, above the company's average trading volume of about 400,000 shares a day.
TheStreet Ratings team rates JONES ENERGY INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate JONES ENERGY INC (JONE) a SELL. This is driven by several weaknesses, 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 high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 2.38 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, JONE has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- JONE'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 28.85%, 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.
- Net operating cash flow has decreased to $45.09 million or 25.10% when compared to the same quarter last year. Despite a decrease in cash flow JONES ENERGY INC is still fairing well by exceeding its industry average cash flow growth rate of -51.31%.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, JONES ENERGY INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- JONES ENERGY INC has improved earnings per share by 9.1% 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, JONES ENERGY INC turned its bottom line around by earning $3.24 versus -$0.05 in the prior year. For the next year, the market is expecting a contraction of 94.8% in earnings ($0.17 versus $3.24).
- You can view the full analysis from the report here: JONE Ratings Report