NEW YORK (TheStreet) -- Shares of Penn Virginia Corp. (PVA) were gaining 9% to $4.85 on heavy trading volume Thursday following a report that oil giant BP (BP) is interested in acquiring the oil company.
BP recently offered to acquire Penn Virginia for $8 a share, according to Proactive Investors. Penn Virginia reportedly rejected BP's initial offer as it would undervalue the company, and is waiting for a bid of at least $10 a share.
Penn Virginia is engaged in the exploration, development and production of crude oil, natural gas liquids (NGL), and natural gas, primarily in the Eagle Ford Shale.
About 8.1 million shares of Penn Virginia were traded by 12:34 p.m. Thursday, above the company's average trading volume of about 3.5 million shares a day.
TheStreet Ratings team rates PENN VIRGINIA CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate PENN VIRGINIA CORP (PVA) 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 deteriorating net income, 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 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 397.3% when compared to the same quarter one year ago, falling from $19.23 million to -$57.17 million.
- Currently the debt-to-equity ratio of 1.98 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, PVA has a quick ratio of 0.63, this demonstrates the lack of ability of the company to cover short-term liquidity 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, PENN VIRGINIA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $45.55 million or 31.56% when compared to the same quarter last year. Despite a decrease in cash flow PENN VIRGINIA CORP is still fairing well by exceeding its industry average cash flow growth rate of -53.29%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 73.41%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 500.00% compared to the year-earlier 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.
- You can view the full analysis from the report here: PVA Ratings Report