TSC Ratings' Upgrades, Downgrades: Markel

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 Tuesday, June 3.

EarthLink (ELNK Quote), an Internet service provider, has been upgraded to buy. For the first quarter, revenue declined 19% year over year to $263.1 million, and earnings per share climbed to 52 cents from a loss of 18 cents. Net operating cash flow has significantly increased by to $41.7 million in the past year.

In addition, the company has vastly surpassed the industry average cash flow growth rate of 44%. The debt-to-equity ratio of 0.83 is somewhat low overall but exceeds the industry average. Its quick ratio of 2.15 is high and demonstrates strong liquidity. Shares have risen in the past year, outperforming the S&P 500. Despite the price increase, the stock sports a price-to-earnings ratio of 29.19, which values it at a discount to others in its space. EarthLink had been rated hold since Oct. 17.

E.W. Scripps (SSP Quote), which together with its subsidiaries operates as a media company, has been upgraded to buy. For the first quarter, revenue grew 6.8% year over year to $642.5 million, and earnings per share increased to 51 cents from 38 cents. For 2008, the market expects an improvement in full-year EPS to $2.53 from a loss of 6 cents.

The company's debt-to-equity ratio is very low at 0.19, implying successful management of debt levels. Its quick ratio of 1.85 demonstrates an ability to cover short-term liquidity needs. Net operating cash flow has increased 40% from the year-ago quarter to $156.5 million. The firm also exceeded the industry average cash flow growth rate of 2.6%. E.W. Scripps had been rated hold since Aug. 17.

Eni SpA (E Quote), an integrated energy company, has been upgraded to buy. For the fourth quarter, revenue grew 25% year over year to $39.44 billion, and earnings per share increased to $2.54 from $1.94. For 2008, the market expects an improvement in full-year EPS to $9.30 from $7.92 in 2007. Return on equity has improved slightly when compared to the same quarter one year prior and exceeds the industry average. With a price-to-earnings ratio of 10.19, the stock trades at a discount to others in its industry. Eni Spa had been rated hold since Oct. 9.

Markel (MKL Quote), which markets and underwrites specialty insurance products and programs, has been downgraded to hold. Strengths such as a solid financial position and a reasonable valuation are countered by deteriorating net income, poor profit margins and weak operating cash flow.

For the first quarter, revenue declined 16% year over year to $520.1 million, and earnings per share declined to $3.41 from $9.88. The debt-to-equity ratio is very low at 0.26, implying very successful management of debt levels. The company's gross profit margin is extremely low at 11% and has decreased significantly from the same period last year. Regardless of the weak results of the gross profit margin, the net profit margin of 6.5% exceeds the industry average. Markel had been rated buy since TheStreet.com Ratings initiated coverage on June 2, 2006.

Cavium Networks (CAVM Quote), which designs, develops and markets semiconductor processors, has been initiated with a hold rating. Strengths such as a solid stock-price performance, robust revenue growth and an encouraging financial position are countered by the stock's premium valuation.

For the first quarter, revenue grew 65% year over year to $18.34 million, and earnings per share swung to a 5-cent profit from a 3-cent loss. At 4.3%, the company's return on equity lags the industry average. The gross profit margin is rather high at 64%, but the net profit margin of 11% trails the industry average. Shares have outperformed the S&P 500 over the past year, and the stock now trades at a premium to others in its industry.

Additional ratings changes from June 3 are listed below.

Ticker	Company Name	Change	New Rating	Former Rating
ASTI	Ascent Solar Technologies	Initiated	Hold
CAVM	Cavium Networks	Initiated	Hold
CCC	Calgon Carbon	Upgrade	Buy	Hold
CINF	Cincinnati Financial	Downgrade	Hold	Buy
CRMT	America's Car-Mart	Upgrade	Buy	Hold
DIN	DineEquity	Downgrade	Sell	Hold
E	Eni SpA	Upgrade	Buy	Hold
ELNK	EarthLink	Upgrade	Buy	Hold
FOE	Ferro Corp.	Upgrade	Hold	Sell
FRZ	Reddy Ice	Downgrade	Sell	Hold
INMD	Integramed America	Downgrade	Hold	Buy
IXYS	IXYS Corp.	Upgrade	Buy	Hold
LTS	Ladenburg Thalmann Financial Services	Upgrade	Hold	Sell
MBRG	Middleburg Financial	Downgrade	Sell	Hold
MFA	MFA Mortgage Investments	Downgrade	Sell	Hold
MKL	Markel Corp.	Downgrade	Hold	Buy
SPRO	SmartPros	Downgrade	Hold	Buy
SSP	EW Scripps	Upgrade	Buy	Hold
UNTD	United Online	Upgrade	Buy	Hold