Stock Upgrades, Downgrades From TheStreet.com Ratings
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.
Logistics software developer Descartes Systems Group (DSGX) has been downgraded to a hold from a buy. The company's earnings per share dropped 33.3% in the first quarter of fiscal 2007 compared with the year-earlier period. Revenue growth has trailed the industry average. Descartes Systems Group's return on equity is also less impressive than its peers in the software industry, coming in at just 4.4% in the most recent quarter. DSGX had been rated a buy since March 2007.
Information technology firm Insight Enterprises (NSIT) has also been downgraded to a hold from a buy. Although the company has posted impressive revenue growth, this does not seem to have trickled down to the bottom line, where earnings per share declined in the most recent quarter compared with the year-earlier period. Net operating cash flow has fallen significantly, by 64.4%, during that same time period. TheStreet.com feels Insight's gross profit margin is currently very low at 14.4%. The net profit margin of 1.5% trails the industry average. NSIT had been rated a buy since June 2005.Orbit International (ORBT) has been upgraded to a buy from a hold. The company makes electronic components used in military aircraft, ships and commercial power units, among other applications. TheStreet.com Ratings believes Orbit is in a largely solid financial position with a low debt-to-equity ratio of just 0.2 and a demonstrated ability to cover short-term cash needs. The company's profit margins have been expanding. These positives seem to have impressed investors, who have pushed the stock up 14.2% in the past year. Orbit International had been rated a hold since August 2006.
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