TSC Ratings' Upgrades, Downgrades: Palm

Next up is Dick's Sporting Goods (DKS Quote), which was downgraded to hold from buy. Dick's is a retailer that offers sporting goods equipment, apparel and footwear. The primary factors that have impacted our rating are mixed with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks.

Dick's revenue growth came in higher than the industry average of 4.5%. Since the same quarter one year ago, revenue rose by 10.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels.

Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.17 is very weak and demonstrates a lack of ability to pay short-term obligations. The change in net income from the same quarter one year ago has significantly exceeded that of the S&P 500 and the specialty retail industry. The net income has decreased by 4.3% when compared to the same quarter one year ago, dropping from $21.7 million to $20.78 million. Net operating cash flow has significantly decreased to -$86.12 million, or 786.7% when compared to the same quarter last year. In addition, when compared to the industry average, the firm's growth rate is much lower.

Looking at the price performance of Dick's shares over the past 12 months, there is not much good news to report. The stock is down 32.75%, and it has underperformed the S&P 500. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, Dick's is still more expensive than most of the other companies in its industry. Dick's Sporting Goods had been rated a buy since June 26, 2006.