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Why Hugoton Royalty Trust (HGT) Stock Is Soaring Today

NEW YORK (TheStreet) -- Hugoton Royalty Trust (HGT) shares are up 21% to $9.74 on Wednesday following the announcement of an arbitration ruling in the company's favor.

The express trust won a $6.1 million ruling from the American Arbitration Association against XTO Energy, which had previously claimed that some of the $37 million dollar settlement it received from its Fankhouser v. XTO Energy, Inc. litigation should come from the trust.

XTO Energy had previously deducted $4.4 million from the company's  proceeds in September and October of 2012. The arbitration settlement covers that amount, plus interest and lawyers fees.

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TheStreet Ratings team rates HUGOTON ROYALTY TRUST as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate HUGOTON ROYALTY TRUST (HGT) 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."

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

  • The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues rose by 20.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HGT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign.
  • HUGOTON ROYALTY TRUST reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, HUGOTON ROYALTY TRUST increased its bottom line by earning $0.87 versus $0.58 in the prior year.
  • The gross profit margin for HUGOTON ROYALTY TRUST is currently very high, coming in at 100.00%. HGT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, HGT's net profit margin of 80.49% significantly outperformed against the industry.
  • HGT has underperformed the S&P 500 Index, declining 14.80% 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.
  • You can view the full analysis from the report here: HGT Ratings Report
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