Great Northern Iron Ore Stock Downgraded (GNI)

NEW YORK ( TheStreet) -- Great Northern Iron Ore (NYSE: GNI) has been downgraded by TheStreet Ratings from buy to hold. 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 ratings report include:
  • The revenue growth came in higher than the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 29.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • GNI 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 3.19, which clearly demonstrates the ability to cover short-term cash needs.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 32.8% when compared to the same quarter one year prior, rising from $4.50 million to $5.97 million.
  • GNI'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 37.94%, 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. Naturally, the overall market trend is bound to be a significant factor. However, 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.
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Great Northern Iron Ore Properties, a conventional nonvoting trust, owns and leases mineral and non-mineral lands on the Mesabi Iron Range in northeastern Minnesota. The company has a P/E ratio of 3.8, equal to the average metals & mining industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Great Northern Iron Ore has a market cap of $93.8 million and is part of the basic materials sector and metals & mining industry. Shares are down 43.2% year to date as of the close of trading on Friday.

You can view the full Great Northern Iron Ore Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet Ratings Staff
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