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Mesabi Trust Stock Downgraded (MSB)

Tickers in this article: MSB

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) -- Mesabi (MSB"> 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, weak operating cash flow and a generally disappointing performance in the stock itself.

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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 1.14, 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 95.87% significantly outperformed against the industry.
  • MSB, with its decline in revenue, underperformed when compared the industry average of 5.4%. Since the same quarter one year prior, revenues fell by 24.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • MESABI TRUST's earnings per share declined by 22.9% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, MESABI TRUST reported lower earnings of $2.35 versus $2.53 in the prior year.
  • Net operating cash flow has significantly decreased to $6.55 million or 73.59% 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.
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Mesabi Trust operates as a royalty trust in the United States. The company produces iron ore pellets. It holds interests the Peter Mitchell mine located at the eastern end of the Mesabi Iron Range, near Babbitt, Minnesota. The company has a P/E ratio of 8.9, below the S&P 500 P/E ratio of 17.7. Mesabi has a market cap of $273.2 million and is part of the financial sector and financial services industry. Shares are down 18% year to date as of the close of trading on Monday.