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 April 4.
Steinway Musical Instruments
, a maker of pianos and other musical instruments, has been upgraded to buy. For the fourth quarter, revenue rose 14% year over year to $121.3 million, and earnings per share climbed to 90 cents from 13 cents. For 2008, the market expects an improvement in full-year EPS to $2.13 from $1.78 in 2007.
In addition, net income growth from year-ago quarter has significantly exceeded that of the S&P 500 and the industry average. Return on equity has greatly risen year over year to 9.4%. This is a clear sign of strength.
The company's gross profit margin, at 35%, is currently lower than desirable, and its net profit margin of 6.4% trails the industry average. Steinway Musical Instruments had been rated hold since June 28, 2006.
, which provides software products to enable design and verification of semiconductors, has been upgraded to buy. Net income increased to $10.4 million from $1.6 million year over year, and earnings per share climbed to 38 cents from 6 cents. Revenue rose 22% to $20 million in the same period.
The company has no debt to speak of, and its quick ratio of 2.21 demonstrates an ability to cover short-term liquidity needs. Shares have outperformed the rise in the
over the past year, and we still see more upside potential for this stock, despite its nice run. Synplicity had been rated hold since Dec. 11.
, which through its subsidiary Absorbtion Corp. develops makes and markets animal care and industrial absorbent products, has been upgraded to buy. In the third quarter of 2007, net income increased dramatically year over year to $740,000 from $70,000 million, and revenue grew 4.8% to $9 million. Earnings per share improved to 11 cents from a penny.
The company's debt-to-equity ratio, 0.45, is below the industry average, implying successful management of debt levels. In addition, the company maintains an adequate quick ratio of 1.34, which illustrates an ability to avoid short-term cash problems. The stock has outperformed the rise in the S&P 500 in the past year. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock. International Absorbents had been rated hold since Oct. 2.
(RVSB - Get Report)
, the holding company for Riverview Community Bank, a provider of banking services to commercial and retail customers, has been downgraded to hold. Expanding profit margins are countered by weak operating cash flow, poor return on equity and a disappointing stock-price performance.
The company's gross profit margin is rather high at 59%. However, for the third quarter of 2007, revenue dropped 5.4% to $17.5 million, and earnings per share declined to 21 cents from 28 cents. Net income has decreased to $2.2 million from $3.2 million. Return on equity has slightly decreased from the year-ago quarter. This implies a minor weakness in the organization. Net operating cash flow has significantly decreased to $50,000 year over year.
In addition, when comparing to the industry average, the firm's growth rate is much lower. Riverview Bancorp had been rated buy since TheStreet.com Ratings initiated coverage on March 31, 2006.
, a brand management and franchising company, has been downgraded to sell. Net income has significantly decreased year over year, falling from a profit of $360,000 to a loss of $4.31 million. Gross profit margin is extremely low at 5.6% and a negative net profit margin of 42% significantly underperformed the industry average.
Shares have tumbled 67% in the past year. Earnings per share have declined along with the stock, from a loss of 2 cents to a loss of 8 cents. This year, the market expects an improvement in full-year EPS to 15 cents from a loss of 8 cents.
Return on equity has improved slightly from the year-ago quarter. This can be construed as a modest strength in the organization. However, Nexcen's return on equity significantly trails both the industry average and that of the S&P 500.
Additional ratings changes from April 4 are listed below.
||Steinway Musical Instruments