NEW YORK (TheStreet) -- Goodrich Petroleum (GDP) shares are down 9.6% to $1.79 on heavy volume Thursday after the oil company's price target was lowered to $4 from $7 by analysts at SunTrust today.
The firm maintained its "buy" rating on the company's stock.
The new price target still represents a potential upside 123% from the stock's current price.
The company's shares fell as low as $1.72 yesterday after opening at $1.93 before rallying to close at $1.98 as falling crude prices took their toll on the stock.
TheStreet Ratings team rates GOODRICH PETROLEUM CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate GOODRICH PETROLEUM CORP (GDP) a SELL. This is driven by a few notable 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, disappointing return on equity, 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 28.35 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.21, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GOODRICH PETROLEUM CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- GDP'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 90.96%, 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. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Net operating cash flow has decreased to $5.72 million or 12.78% when compared to the same quarter last year. Despite a decrease in cash flow GOODRICH PETROLEUM CORP is still fairing well by exceeding its industry average cash flow growth rate of -53.28%.
- Along with the very weak revenue results, GDP underperformed when compared to the industry average of 38.6%. Since the same quarter one year prior, revenues plummeted by 53.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: GDP Ratings Report