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Stock Upgrades, Downgrades From TheStreet.com Ratings

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.

However, 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 a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.

The following ratings changes were generated on March 28.

Northwest Bancorp (NWSB) operates as the holding company for Northwest Savings Bank, which offers various banking and consumer finance services. The stock has been upgraded to buy. For the fourth quarter, revenue rose 11% to $116 million, and earnings per share improved to 33 cents from 20 cents. The net income increased 62% to $15.91 million. Northwest's gross profit margin is rather high at 53% and has increased from the year-ago period. Net operating cash flow has increased 53% to $22.1 million from the year-ago quarter. Share price is relatively unchanged in the past year, and the stock has a price-to-earnings ratio of 27.52, making it cheaper than others in its industry. Northwest Bancorp had been rated hold since Jan. 15.

United Fire and Casualty (UFCS - Get Report), which through its subsidiaries writes property and casualty insurance as well as life insurance, has been upgraded to buy. For the fourth quarter, revenue dropped 0.4% to $165.8 million, and earnings per share decreased to 97 cents from $1.06. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share. The company has no debt to speak of, resulting in a debt-to-equity ratio of zero, which we consider a favorable sign. Net operating cash flow has significantly increased to $48 million year over year. Return on equity has improved slightly from the year-ago quarter, and exceeds the industry average.

The stock's price increase has clearly outperformed the rise in the S&P 500 over the past year, in spite of weak earnings results. We believe the stock still has good upside potential despite this year's gains. Shares have a price-to-earnings ratio of 9.47, making them cheaper than others in their industry.

Fidelity National Financial (FNF - Get Report), which through its subsidiaries provides title insurance, specialty insurance, claims management and information services, has been upgraded to hold. A solid financial position is balanced by a generally soft stock-price performance, deteriorating net income and disappointing return on equity. For the fourth quarter, revenue fell 28% to $1.3 billion, and earnings per share swung to a loss of 21 cents from a profit of 34 cents. For 2008, however, the market expects an improvement in full-year EPS to $1.25 from 57 cents in 2007.

The company's debt-to-equity ratio of 0.44 is low but exceeds the industry average. Return on equity has decreased to 4% from 13% in the year-ago quarter and lags the industry average. Net operating cash flow has significantly decreased 88% from the year-ago period to $37.4 million. Fidelity National Financial had been rated sell since Sept. 27.

American Financial Group (AFG - Get Report), which underwrites property and casualty insurance through its subsidiaries, has been downgraded to hold. Strengths such as an attractive valuation and a solid financial position are balanced by deteriorating net income, poor profit margins and weak operating cash flow. For the fourth quarter, revenue dropped 7.5% year over year to $1.04 billion, and earnings per share decreased to 76 cents from $1.11.

The company's gross profit margin is rather low at 22%, and its net profit margin of 8.70% trails the industry average. Net income has decreased 34% year over year to $89.90 million. With a price-to-earnings ratio of 8.20, the stock is cheaper than others in its industry. However, we do not feel that the valuation justifies further investment at this time. American Financial Group had been rated buy since TheStreet.com Ratings initiated coverage on March 27, 2006.

Smurfit-Stone Container (SSCC), which through its subsidiary Smufit-Stone Container Enterprises, makes paperboard and paper-based packaging products, has been downgraded to sell. Return on equity has decreased year over year to trail both the industry average and the S&P 500. In addition, gross profit margin is rather low at 19%, and net profit margin, at 2.4%, trails the industry average.

Net operating cash flow has decreased 25% year over year to $109 million. The company's debt-to-equity ratio of 1.81 is below the industry average, suggesting that this level of debt is acceptable within the containers and packaging industry. However, its quick ratio of 0.43 is very low and demonstrates very weak liquidity.

Shares have fallen 33% in the past year. In one sense, the sharp decline is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now. Smurfit-Stone Container had been rated hold since Feb. 15, 2007.

Additional ratings changes from March 28 are listed below.

Ticker Company Name Change New Rating Former Rating
AFG AMERICAN FINANCIAL GROUP INC Downgrade Hold Buy
SOAP SOAPSTONE NETWORKS INC Upgrade Buy Hold
ELTK ELTEK LTD Downgrade Sell Hold
TMNG MANAGEMENT NETWORK GROUP INC Downgrade Sell Hold
NOIZ MICRONETICS INC Upgrade Buy Hold
NWSB NORTHWEST BANCORP INC Upgrade Buy Hold
RBNF RURBAN FINANCIAL CORP Downgrade Hold Buy
SSCC SMURFIT-STONE CONTAINER CORP Downgrade Sell Hold
UFCS UNITED FIRE & CAS CO Upgrade Buy Hold
JVA COFFEE HOLDING CO INC Downgrade Sell Hold
FNF FIDELITY NATIONAL FINANCIAL Upgrade Hold Sell
SOLF SOLARFUN POWER HOLDINGS -ADR Initiated Sell
RDIAF ROCKWELL DIAMONDS INC Initiated Sell
This article was written by a staff member of TheStreet.com Ratings.

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SYM TRADE IT LAST %CHG
RDIAF $0.20 0.00%
AFG $66.56 0.00%
FNF $38.14 0.00%
UFCS $33.27 0.00%
AAPL $126.00 0.00%

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