TSC Ratings' Updates: Netflix

Netflix's gross profit margin is rather high at 50.7%, but it has managed to decrease from the same period last year. The net profit margin of 6%, however, compares favorably to the industry average. Shares are down 11.05%, reflecting, in part, the market's overall decline. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

We've downgraded Varian Medical Systems(VAR Quote), which provides cancer therapy systems worldwide, from buy to hold. Strengths include its growth in earnings per share, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.

Varian has improved earnings per share by 11.5% in the most recent quarter compared with the same quarter a year ago. The company has demonstrated a pattern of positive EPS growth over the past two years, and we feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, Varian increased its bottom line by earning $2.25 vs. $1.83 in the prior year. This year, the market expects an improvement in earnings to $2.60. Despite its growing revenue, the company underperformed the industry average of 18.3%. Since the same quarter one year prior, revenues rose by 13.4%. The gross profit margin of 44.30% is strong and has increased from the same quarter the previous year. However, net profit margin of 13.20% trails the industry average.

The company's current return on equity has slightly decreased from the same quarter one year prior, implying a minor weakness in the organization. Varian's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500. The net income has decreased by 0.2% when compared to the same quarter one year ago, dropping from $78.63 million to $78.50 million. On the basis of net income, Varian underperformed the health care equipment and supplies industry but outperformed the S&P 500.

Other ratings changes include FreightCar America(RAIL Quote) and First American(FAF Quote), both downgraded from hold to sell.

All ratings changes generated on Nov. 4 are listed below.

ABG	Asbury Automotive Group	SELL	Downgrade	HOLD
AIN	Albany International	SELL	Downgrade	HOLD
ALX	Alexander's	HOLD	Downgrade	BUY
ANDE	Andersons	HOLD	Downgrade	BUY
APAB	Appalachian Bancshares	SELL	Downgrade	HOLD
BCE	BCE	HOLD	Downgrade	BUY
BITI	Bio-Imaging Technologies	HOLD	Downgrade	BUY
CHLN	China Housing & Land	SELL	Downgrade	HOLD
CITZ	CFS Bancorp	SELL	Downgrade	HOLD
COOP	Cooperative Bankshares	SELL	Downgrade	HOLD
CUTR	Cutera	SELL	Downgrade	HOLD
CXW	Corrections	HOLD	Downgrade	BUY
EPHC	Epoch Holding	HOLD	Downgrade	BUY
FAF	First American	SELL	Downgrade	HOLD
FSR	Flagstone	SELL	Downgrade	HOLD
GLBZ	Glen Burnie	SELL	Downgrade	HOLD
GSIT	GSI Technology	SELL	Downgrade	HOLD
HGIC	Harleysville	HOLD	Downgrade	BUY
ITEX	Itex	HOLD	Upgrade	SELL
KEI	Keithley	SELL	Downgrade	HOLD
KOF	Coca-Cola Femsa	HOLD	Downgrade	BUY
LOOK	Looksmart	SELL	Downgrade	HOLD
LOOP	Loopnet	SELL	Downgrade	HOLD
MCY	Mercury General	HOLD	Downgrade	BUY
MIGP	Mercer Insurance	HOLD	Downgrade	BUY
MMUS	MakeMusic	SELL	Downgrade	HOLD
MWE	Markwest Energy	SELL	Downgrade	HOLD
MXGL	Max Capital	SELL	Downgrade	HOLD
NFLX	Netflix	HOLD	Downgrade	BUY
NSHA	Nashua	SELL	Downgrade	HOLD
NTY	NBTY	HOLD	Downgrade	BUY
OFI	Overhill Farms	HOLD	Downgrade	BUY
PWVI	PowerVerde	FROZEN		HOLD
RAIL	FreightCar America	SELL	Downgrade	HOLD
RJF	Raymond James	HOLD	Downgrade	BUY
SAFT	Safety Insurance	HOLD	Downgrade	BUY
SGB	Southwest Georgia Financial	SELL	Downgrade	HOLD
STZ.B	Constellation Bran ds	SELL	Downgrade	HOLD
TKLC	Tekelec	HOLD	Downgrade	BUY
TLEO	Taleo	SELL	Downgrade	HOLD
VAR	Varian Medical	HOLD	Downgrade	BUY
WGO	Winnebago Industries	SELL	Downgrade	HOLD
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.