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TheStreet.com Ratings: Stock Upgrades, Downgrades

Each weekday, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates.

While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenue, financial strength and company cash flows.

Some recent rating changes are highlighted below.

TheStreet.com has initiated coverage of Brazilian air carrier Tam S.A. (TAM) with a hold rating. Revenues, net income and earnings per share all increased in the fourth quarter of fiscal 2006 compared with the same quarter a year earlier. However, the market is expecting a contraction in the company's earnings in the coming year. Like all airlines, Tam will need to overcome persistently high fuel costs and intense competition to continue to succeed.

Hotel and resort company Four Seasons (FS) has been upgraded to a buy from a hold. The company's revenues grew 19.3% in the fourth quarter of fiscal 2006 compared with the same quarter a year earlier, outpacing the industry average of 11.9% during that same time period. This revenue growth appears to have trickled down to the bottom line. Four Seasons was able to earn 44 cents per share in the most recent quarter, after losing $1.03 during that same quarter in fiscal 2005. FS had been rated a hold since April 2005.

Semiconductor equipment manufacturer ASM International (ASMI) has been upgraded to a buy from a hold. The company earned 56 cents per share in the fourth quarter of fiscal 2006, after losing 61 cents per share during the same quarter a year ago. TheStreet.com Ratings feels this earnings growth was the key to a 17.2% rise in the company's stock price over the past 12 months. ASM's return on equity has now risen to the point where it exceeds the industry average. The stock had been rated a hold since February 2006.

Women's apparel retailer Cache (CACH) has been downgraded to a hold from a buy. The company's net income and earnings per share both fell around 40% in the fourth quarter of fiscal 2006 compared with the same quarter a year earlier. Return on equity has also declined during that same period, which TheStreet.com Ratings feels is a sign of weakness within the company. Cache had been rated a buy since April 2005.

TheStreet.com Ratings has initiated coverage of information technology provider NCI (NCIT) with a hold rating. The company's revenues grew 36.3% in the fourth quarter of fiscal 2006 compared with the same quarter a year ago. NCI also has a debt-to-equity ratio of just 0.01 and enough cash and other noninventory assets to cover short-term liquidity needs. However, net income, profit margins and earnings per share have all been deteriorating over the past fiscal year.

Additional ratings changes are listed in the table below.

TheStreet.com Ratings Stock Upgrades, Downgrades
Company Name Ticker Change New Rating Old Rating
NCI NCIT Initiation Hold n/a
TAM SA TAM Initiation Hold n/a
Rand Logistics RLOG Initiation Hold n/a
Harvest Energy Trust HTE Downgrade Sell Hold
Four Seasons Hotels FS Upgrade Buy Hold
ASM International ASMI Upgrade Buy Hold
Cache CACH Downgrade Hold Buy
Canterbury Park ECP Upgrade Buy Hold
Source: TheStreet.com Ratings

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