TSC Ratings' Updates: Callaway Golf

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 Thursday, Sept. 4.

Callaway Golf(ELY Quote) has been upgraded from hold to buy. Callaway Golf, together with its subsidiaries, designs, manufactures and sells golf clubs and golf balls in the U.S. and internationally. Its products include drivers, fairway woods, hybrids, irons, wedges, putters and golf balls.

The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.