The firm maintained its buy rating.
C&J Energy Services's "underperformance" is tied to its high dilution risk with regard to covenants, Jefferies said in an analyst note.
Jefferies also mentioned the company's 2014 revenue, which was up 50% over 2013 to $1.6 billion, as reason for confidence in its "relative recovery."
C&J Energy Services, based in Houston, provides completion and production services for oil and gas companies.
Shares of the company are trading well below the company's 52-week high of $31.53, with the stock down 3.53% to $7.51 in afternoon trading on Wednesday.
Separately, TheStreet Ratings team rates C&J ENERGY SERVICES LTD as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate C&J ENERGY SERVICES LTD (CJES) 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, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
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 Energy Equipment & Services industry. The net income has significantly decreased by 686.3% when compared to the same quarter one year ago, falling from $11.11 million to -$65.12 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, C&J ENERGY SERVICES LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for C&J ENERGY SERVICES LTD is currently extremely low, coming in at 14.03%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -12.73% is significantly below that of the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 68.62%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 380.00% compared to the year-earlier 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.
- C&J ENERGY SERVICES LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, C&J ENERGY SERVICES LTD increased its bottom line by earning $1.23 versus $1.21 in the prior year. For the next year, the market is expecting a contraction of 234.1% in earnings (-$1.65 versus $1.23).
- You can view the full analysis from the report here: CJES Ratings Report