Each business day, 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.
The rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.
For those reasons, we believe that a rating alone cannot tell the whole story and that it should be part of an investor's overall research.F5 Networks (FFIV - Get Report), through its subsidiaries, develops, markets and sells products that help customers manage application traffic on Internet-based networks. The company has been downgraded to a hold from a buy. The company's fourth-quarter revenue rose by 30.3% compared with the same period last year, though this lagged the industry average of 39%. F5 has no debt to speak of, a relatively favorable sign. In addition, F5's quick ratio of 2.28 demonstrates the company's ability to cover short-term liquidity needs. However, the company's net income fell by 27.4% to $12.88 million, or 15 cents a share, in the fourth quarter, compared with $17.75 million, or 22 cents per share in the same period last year. The company's stock price has fallen by 41.08% in the last 12 months, and its return on equity decreased in the fourth quarter from the same quarter one year prior. This implies a major weakness in the organization. F5 had been rated a buy since coverage was initiated in January 2006. Industrial Services of America (IDSA - Get Report) sells package waste and recycling management services to commercial, industrial and logistic customers in North America. It has been downgraded to a hold from a buy. The company's third-quarter revenue rose by 16.9% compared with the same period last year, outpacing the industry average of 0.8%. Its low debt-to-equity ratio of 0.66 is below that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. In addition, Industrial Services of America sports an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems. Weaknesses include a 12.7% drop in net income in the third quarter to $380,000 from $440,000 in the same period last year. In addition, the company displays poor profit margins and weak operating cash flow. Industrial Services of America had been rated a buy since June 2007. Werner Enterprises (WERN - Get Report) hauls truckload shipments of general commodities through two segments: truckload transportation services and value-added services. It has been downgraded to a hold from a buy. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. Werner's third-quarter earnings slipped to 30 cents per share from 31 cents a share in the same period last year, continuing a pattern of somewhat volatile earnings recently. The company's gross profit margin came in at 14.2% in the third quarter, having decreased from the same period last year. Along with this, its net profit margin of 4.3% trails the industry average. Werner Enterprises had been rated a buy since coverage was initiated in January 2006.