NEW YORK ( TheStreet) -- Mesa Royalty (NYSE: MTR) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 15.2% when compared to the same quarter one year prior, going from $1.39 million to $1.60 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 24.9%. Since the same quarter one year prior, revenues rose by 15.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for MESA ROYALTY TRUST is currently very high, coming in at 100.00%. MTR has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MTR's net profit margin of 97.90% significantly outperformed against the industry.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, MTR has underperformed the S&P 500 Index, declining 24.80% 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.
- MESA ROYALTY TRUST' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, MESA ROYALTY TRUST reported lower earnings of $2.96 versus $3.51 in the prior year.
-- Written by a member of TheStreet Ratings Staff