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 company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.
Apollo Group (APOL - Get Report), which provides higher educational programs and services for working students, has been upgraded to buy. The company has shown revenue growth, good cash flow from operations, expanding profit margins and solid stock price performance. TheStreet.com Ratings feels these strengths outweigh the company's disappointing return on equity. In June, Apollo Group reported third-quarter earnings that were basically flat, but did beat Wall Street's expectations. Revenue rose 12% to $733.4 million. The company had been rated a hold since March 2006.
Integrated Silicon Solution (ISSI - Get Report), a fabless semiconductor company, has been upgraded to hold. While the company has a largely solid financial position with growth in revenue earnings per share and reasonable debt levels, profit margins have been poor overall. Return on equity significantly trails the semiconductor industry average. In May, the company posted revenue of $60 million, up 12.8% from the previous year. Integrated Silicon Solution had been rated a sell since November 2005.PrivateBancorp (PVBT), a financial services company, has been downgraded to hold. The company has seen robust revenue growth, good cash flow from operations and expanding profit margins. However, its performance and return on equity have been disappointing. In April, the company's first-quarter results were basically flat in comparison with the year-ago period. Based on its current price in relation to its earnings, PrivateBancorp is still more expensive than most of the other companies in its industry. The company had been rated a buy since August 2005. Rare Hospitality International (RARE), which operates and franchises restaurants, has been downgraded to a hold. The company has shown revenue growth and reasonable valuation levels, but it also has deteriorating net income, poor profit margins and weak operating cash flow. Its revenue growth has also trailed the industry average. In April, Rare Hospitality said first-quarter income totaled $13.8 million, or 45 cents a share, on $267.6 million in sales; that was down from $17.2 million, or 50 cents a share, on $261.9 million in sales a year earlier. The company had been rated a buy since July 2005. Cargo Airline ABX Air (ABXA) has been upgraded to buy. The company's stock price has performed solidly and it has demonstrated notable return on equity and reasonable valuation levels. TheStreet.com Ratings believes these strengths outweigh the company's sub-par growth in net income. Last month, ABX Air said Astar Air Cargo Holdings had made an unsolicited "indication of interest" in buying the company for $7.75 per share in cash. ABX Air said it would evaluate the proposal and any formal offer. The company had been rated a hold since May. Additional ratings changes are listed below.
|Stock Upgrades, Downgrades from TheStreet.com Ratings|
|Company Name||Ticker||Change||New Rating||Former Rating|
|Integrated Silicon Solutions||ISSI||Upgrade||Hold||Sell|
|Steward & Co||WPL||Upgrade||Hold||Sell|
|Technology Invt Cap||TICC||Initiation||Hold||n/a|
|Source: TheStreet.com Ratings|