San Juan Basin Royalty Stock Upgraded (SJT)

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) -- San Juan Basin Royalty (NYSE: SJT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

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Highlights from the ratings report include:
  • SJT's very impressive revenue growth greatly exceeded the industry average of 3.3%. Since the same quarter one year prior, revenues leaped by 179.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SJT 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 3.48, 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 Oil, Gas & Consumable Fuels industry. The net income increased by 191.4% when compared to the same quarter one year prior, rising from $4.62 million to $13.46 million.
  • The gross profit margin for SAN JUAN BASIN ROYALTY TR is currently very high, coming in at 100.00%. SJT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, SJT's net profit margin of 97.90% significantly outperformed against the industry.
  • SAN JUAN BASIN ROYALTY TR reported significant earnings per share improvement 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, SAN JUAN BASIN ROYALTY TR reported lower earnings of $0.71 versus $1.45 in the prior year.

San Juan Basin Royalty Trust operates as an express trust. The company has a 75% net overriding royalty interest carved out of Burlington's oil and gas leasehold interests (the underlying properties) in properties located in the San Juan Basin in northwestern New Mexico. San Juan Basin Royalty has a market cap of $839.9 million and is part of the basic materials sector and energy industry. Shares are up 5.1% year to date as of the close of trading on Tuesday.

You can view the full San Juan Basin Royalty Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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