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Why SandRidge (SD) Is Still a 'Sell'

Tickers in this article: SD

NEW YORK (TheStreet) -- TheStreet Ratings team has reiterated its "sell" rating for SandRidge , with a ratings score of D+ despite recent gains.

Shares of SandRidge rose 2.4% to $5.91 Thursday. The energy company gained 17.9% over the past six months, but is down 16.6% over the past year. SandRidge hit a 52-week high of $7.24 on Jan. 23, 2013. More than 14.2 million shares of the company were traded Wednesday, above the average daily volume of 10.9 million.

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TheStreet Ratings team rates SandRidge as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SANDRIDGE ENERGY INC (SD) a SELL. This is driven by a number of negative factors, 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 disappointing return on equity, generally disappointing historical performance in the stock itself and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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, SANDRIDGE ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • SD has underperformed the S&P 500 Index, declining 7.57% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Currently the debt-to-equity ratio of 1.76 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, SD's quick ratio is somewhat strong at 1.49, demonstrating the ability to handle short-term liquidity needs.
  • SD, with its decline in revenue, slightly underperformed the industry average of 5.6%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for SANDRIDGE ENERGY INC is rather high; currently it is at 69.04%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -14.82% is in-line with the industry average.