Great Northern Iron Ore Properties Downgraded (GNI)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Great Northern Iron Ore (Nasdaq: GNI) has been downgraded by TheStreet Ratings from buy to sell. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and weak operating cash flow. As the trust will dissolve in April 2015, there is substantial risk that aggregate upcoming and terminal disbursements will not exceed the current share price.

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Highlights from the ratings report include:
  • GREAT NORTHERN IRON ORE PPTY's earnings per share declined by 20.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, GREAT NORTHERN IRON ORE PPTY reported lower earnings of $13.38 versus $15.37 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Metals & Mining industry. The net income has decreased by 20.2% when compared to the same quarter one year ago, dropping from $4.27 million to $3.40 million.
  • Net operating cash flow has decreased to $3.19 million or 47.12% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • In its most recent trading session, GNI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, GREAT NORTHERN IRON ORE PPTY's return on equity significantly exceeds that of both the industry average and the S&P 500.

Great Northern Iron Ore Properties, a conventional nonvoting trust, owns and leases mineral and non-mineral properties on the Mesabi Iron Range in northeastern Minnesota.

You can view the full Great Northern Iron Ore Ratings Report or get investment ideas from our investment research center.

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