TSC Ratings' Updates: Tiffany

The following ratings changes were generated on Tuesday, Nov. 11.

We've downgraded Discover Financial Services(DFS Quote) from hold to sell, driven by its generally disappointing historical performance in the stock itself and poor profit margins.

Discover's gross profit margin is rather low at 22.7%, having decreased significantly from the same period last year. Net profit margin of 11.5%, however, is above the industry average. Net income has decreased by 11% since the same quarter a year ago, to $180.05 million. Earnings per share declined by 27.4%. Shares are down 38.38% on the year, reflecting the overall decline in the broad market as well as the decline in the company's EPS. Don't assume, though, that it can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, DFS is still more expensive than most of the other companies in its industry.

We've downgraded Legg Mason (LM Quote) from hold to sell, driven by its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

EPS declined steeply, by 160.16%, in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, Legg Mason reported lower earnings of $1.81 vs. $4.48 in the prior year, and the market is expecting a further contraction for the next year of 87.8% to 22 cents. Net income is down 158.5% from the same quarter a year ago, underperforming the S&P 500 and the capital markets industry. Return on equity has greatly decreased, as well, also underperforming the S&P 500 and the industry average. Net operating cash flow has significantly decreased to -$529.12 million, or 228.37% when compared with the same quarter last year. The firm's growth rate is lower than the industry average.