NEW YORK (TheStreet) -- Basic Energy Services Inc. was downgraded to "sell" from "buy" at Goldman Sachs today with a price target of $12. The oil and gas service company, which specializes in well site services, wouldabe negatively affected by a slowdown in U.S. land activity, analysts said. a"The primary drivers for our downgrade are a slowdown in U.S. land activity, where we expect customer capital spending to decline 6% next year following the cut in our 2015 WTI estimates to $74/bbl (prior: $90/bbl)," analysts said, adding, "Basic Energy's strong operating and financial leverage implies that any slowdown in U.S. land activity will drive revenues and margins sharply lower, and put pressure on its already stretched balance sheet." Must Read: Warren Buffett's 25 Favorite Stocks STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. "Basic Energy has a high degree of exposure to the smaller public and private E&Ps, which we believe are likely to lead any capital spending cuts in the case that oil prices continue to trend lower," analysts added, " and high exposure to spot pricing poses a threat to its margins." Shares of Basic Energy are down 7.76% to $12.83. Separately, TheStreet Ratings team rates BASIC ENERGY SERVICES INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation: "We rate BASIC ENERGY SERVICES INC (BAS) a HOLD. The primary factors that have impacted our rating are mixed--some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins." Highlights from the analysis by TheStreet Ratings Team goes as follows: The revenue growth came in higher than the industry average of 9.9%. Since the same quarter one year prior, revenues rose by 21.3%. Growth in the company's revenue appears to have helped boost the earnings per share. The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 242.8% when compared to the same quarter one year prior, rising from -$6.96 million to $9.93 million. Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential. The gross profit margin for BASIC ENERGY SERVICES INC is rather low; currently it is at 19.13%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 2.52% significantly trails the industry average. 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. You can view the full analysis from the report here: BAS Ratings Report STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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