TSC Ratings' Updates: Cephalon

Net income increased by 125.8% when compared to the same quarter one year prior, rising from $24.36 million to $55.00 million, exceeding the net income growth of the S&P 500 and the oil, gas & consumable fuels industry. Revenue growth of 24.3% trails the industry average of 35.8%, but it appears to have helped boost the earnings per share. Return on equity has greatly decreased from the same quarter one year prior, a signal of major weakness within the corporation, outperforming the industry and the overall market. The debt-to-equity ratio is very high at 3.20 and currently higher than the industry average, implying very poor management of debt levels within the company.

Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.

Other ratings changes include Smith Micro(SMSI) and LA-Z-Boy(LZB), both downgraded from hold to sell.

All ratings changes generated on Oct. 30 are listed below.

ABB	ABB	HOLD	Downgrade	BUY
BOKF	BOK Financial	BUY	Upgrade	HOLD
CEPH	Cephalon	BUY	Upgrade	HOLD
EDAC	Edac Technologies	SELL	Downgrade	HOLD
EIG	Employers Holdings	SELL	Downgrade	HOLD
FFIC	Flushing Financial	HOLD	Downgrade	BUY
FISI	Financial Institutions	HOLD	Downgrade	BUY
GMK	Gruma SAB	HOLD	Upgrade	SELL
GYMB	Gymboree	HOLD	Downgrade	BUY
HERO	Hercules Offshore	HOLD	Upgrade	SELL
HLF	Herbalife	HOLD	Downgrade	BUY
ID	L-1 Identity Solutions	SELL	Downgrade	HOLD
ISEE	Emerging Vision	SELL	Downgrade	HOLD
ISSI	Integrated Silicon	SELL	Downgrade	HOLD
JDSU	JDS Uniphase	SELL	Downgrade	HOLD
LAZ	Lazard	HOLD	Downgrade	BUY
LZB	LA-Z-Boy	SELL	Downgrade	HOLD
MED	Medifast	HOLD	Downgrade	BUY
MIG	Meadowbrook	HOLD	Downgrade	BUY
MOG.A	MOOG	HOLD	Downgrade	BUY
MUR	Murphy Oil	HOLD	Downgrade	BUY
NEM	Newmont Mining	SELL	Downgrade	HOLD
NOVB	North Valley Bancorp	SELL	Downgrade	HOLD
OME	Omega Protein	HOLD	Downgrade	BUY
PLL	Pall	HOLD	Downgrade	BUY
POZN	Pozen	SELL	Downgrade	HOLD
PRPM	Jenna Lane	SELL	Initiated
PTIE	Pain Therapeutics	BUY	Upgrade	HOLD
RSG	Republic Services	HOLD	Downgrade	BUY
SBIB	Sterling Bancshares	HOLD	Downgrade	BUY
SMSI	Smith Micro	SELL	Downgrade	HOLD
SRCE	1st Source	HOLD	Downgrade	BUY
TTES	T-3 Energy	HOLD	Downgrade	BUY
VOCS	Vocus	SELL	Downgrade	HOLD
VTO	Vitro	SELL	Downgrade	HOLD
WLL	Whiting Petroleum	HOLD	Downgrade	BUY
WLT	Walter Industries	HOLD	Upgrade	SELL
Source: 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.

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