BP Prudhoe Bay Royalty Trust Stock Downgraded (BPT)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- BP Prudhoe Bay Royalty (NYSE: BPT) has been downgraded by TheStreet Ratings from buy to hold. 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 and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and a generally disappointing performance in the stock itself.

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Highlights from the ratings report include:
  • BPT 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 5.00, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 99.00% significantly outperformed against the industry.
  • BP PRUDHOE BAY ROYALTY TRUST's earnings per share declined by 12.5% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BP PRUDHOE BAY ROYALTY TRUST increased its bottom line by earning $9.40 versus $8.62 in the prior year.
  • Looking at the price performance of BPT's shares over the past 12 months, there is not much good news to report: the stock is down 34.85%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 12.4% when compared to the same quarter one year ago, dropping from $56.48 million to $49.49 million.
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BP Prudhoe Bay Royalty Trust operates as a grantor trust in the United States. The company holds overriding royalty interests constituting a non-operational interest in minerals in the Prudhoe Bay oil field located on the North Slope in Alaska. The company has a P/E ratio of 28.9, above the S&P 500 P/E ratio of 17.7. BP Prudhoe Bay Royalty has a market cap of $1.64 billion and is part of the basic materials sector and energy industry. Shares are down 32.9% year to date as of the close of trading on Tuesday.

You can view the full BP Prudhoe Bay Royalty Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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