Adobe, Dress Barn: Ratings Changes

BOSTON (TheStreet) -- TheStreet.com's stock-rating model upgraded software maker Adobe Systems(ADBE Quote) to "buy."

The numbers: Third-quarter profit fell 29% to $136 million, or 26 cents a share, as revenue fell 21% to $698 million. Its gross margin rose from 86% to 89% and its operating margin dropped from 25% to 24%. The company has an admirable financial position, with $2.6 billion of cash compared with $350 million of debt.

The stock: Adobe has jumped 63% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 28, a premium to the market, but a discount to software peers. The company doesn't pay dividends.

The model upgraded women's apparel retailer Dress Barn(DBRN Quote) to "buy."

The numbers: Fiscal fourth-quarter profit increased 20% to $26 million, or 41 cents a share, as revenue grew 4% to $399 million. Its gross margin remained steady at 40% and its operating margin was unchanged at 10%. A quick ratio of 1 demonstrates adequate liquidity. A debt-to-equity ratio of 0.2 indicates modest leverage.

The stock: Dress Barn has advanced 74% this year, outpacing major U.S. indices. The stock trades at a price-to-earnings ratio of 17, a discount to the market and apparel retail peers. The company doesn't pay dividends.

The model upgraded Emcor Group(EME Quote), provider of electrical construction services, to "buy."

The numbers: Second-quarter profit rose 2% to $45 million, or 67 cents a share, as revenue fell 17% to $1.4 billion. Its gross margin rose from 14% to 16%, but its operating margin was unchanged at 5%. A quick ratio of 1.3 reflects adequate liquidity. A debt-to-equity ratio of 0.2 indicates conservative leverage.