TSC Ratings' Updates: Getty Realty

Gruma experienced a steep decline of 293.3% in EPS in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, it increased its bottom line by earning $1.71 vs. $1.18 in the prior year, but for the next year, the market is expecting a contraction of 117.1% in earnings to -20 cents. Shares are down 82.2% on the year, underperforming the S&P 500. Naturally, the overall market trend is bound to be a significant factor, and 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.

We've upgraded Getty Realty(GTY Quote), which owns and leases retail motor fuel and convenience store properties and petroleum distribution terminals, from hold to buy, driven by its largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations, notable return on equity and relatively strong performance when compared with the S&P 500.

The debt-to-equity ratio is somewhat low at 0.64 and is less than that of the industry average, implying a relatively successful effort in the management of debt levels. Getty's gross profit margin is rather high at 57%, having increased from the same quarter the previous year, and the net profit margin of 51% significantly outperformed the industry average. Net operating cash flow has slightly increased to $12 million, or 2.66% compared with the same quarter last year, but Getty's cash flow growth rate is still lower than the industry average growth rate of 13.39%.