NEW YORK ( TheStreet) -- Eastern American Natural Gas (NYSE: NGT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • NGT 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. Along with this, the company maintains a quick ratio of 9.11, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for EASTERN AMERN NATURAL GAS TR is currently very high, coming in at 85.50%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 74.50% significantly outperformed against the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, EASTERN AMERN NATURAL GAS TR has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • The revenue fell significantly faster than the industry average of 35.4%. Since the same quarter one year prior, revenues slightly dropped by 6.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • After a year of stock price fluctuations, the net result is that NGT's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

Eastern American Natural Gas Trust, a grantor trust, engages in acquiring and holding net profits interests in gas properties. The company has a P/E ratio of 25.9, below the average financial services industry P/E ratio of 26 and above the S&P 500 P/E ratio of 17.7. Eastern American Natural Gas has a market cap of $140.5 million and is part of the financial sector and financial services industry. Shares are up 3.5% year to date as of the close of trading on Tuesday.

You can view the full Eastern American Natural Gas Ratings Report or get investment ideas from our investment research center.
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