NEW YORK ( TheStreet) -- Hugoton Royalty (NYSE: HGT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity. Highlights from the ratings report include:
- The revenue growth significantly trails the industry average of 36.0%. Since the same quarter one year prior, revenues slightly increased by 5.3%. 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. Along with this, the company maintains a quick ratio of 23.05, which clearly demonstrates the ability to cover short-term cash needs.
- HUGOTON ROYALTY TRUST has improved earnings per share by 8.3% 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 $1.55 versus $0.73 in the prior year.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness 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, HUGOTON ROYALTY TRUST has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- HGT's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 35.16%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.