Select Income REIT Stock Downgraded (SIR)

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) -- Select Income REIT (NYSE: SIR) 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, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and feeble growth in the company's earnings per share.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.6%. Since the same quarter one year prior, revenues rose by 23.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for SELECT INCOME REIT is rather high; currently it is at 65.32%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 53.30% significantly outperformed against the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • SELECT INCOME REIT' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, SELECT INCOME REIT increased its bottom line by earning $2.11 versus $2.10 in the prior year. For the next year, the market is expecting a contraction of 3.3% in earnings ($2.04 versus $2.11).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SELECT INCOME REIT's return on equity is below that of both the industry average and the S&P 500.
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Select Income REIT is a real estate investment trust managed by Reit Management & Research LLC. The firm invests in the real estate markets of United States with a focus on Hawaii. The fund seeks to invest in office and industrial properties. Select Income REIT is domiciled in United States. Select Income REIT has a market cap of $1.68 billion and is part of the financial sector and real estate industry. Shares are up 5.2% year to date as of the close of trading on Wednesday.

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

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