Mesabi Trust Stock Downgraded (MSB)

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) -- Mesabi (NYSE: MSB) 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 feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow.

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Highlights from the ratings report include:
  • MSB 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.47, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for MESABI TRUST is currently very high, coming in at 100.00%. MSB has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MSB's net profit margin of 96.67% significantly outperformed against the industry.
  • The revenue fell significantly faster than the industry average of 3.9%. Since the same quarter one year prior, revenues fell by 46.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 47.2% when compared to the same quarter one year ago, falling from $11.62 million to $6.14 million.
  • Net operating cash flow has significantly decreased to $6.89 million or 52.95% 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.

Mesabi Trust operates as a royalty trust in the United States. The company produces iron ore pellets. It holds interest in the Peter Mitchell mine located in the Mesabi Iron Range near Babbitt, Minnesota. The company has a P/E ratio of 13.8, below the S&P 500 P/E ratio of 17.7. Mesabi has a market cap of $288.6 million and is part of the financial sector and financial services industry. Shares are down 0.6% year to date as of the close of trading on Friday.

You can view the full Mesabi Ratings Report or get investment ideas from our investment research center.

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