TSC Ratings' Updates: Whole Foods

We've downgraded Perot Systems(PER Quote), which provides information technology services and business solutions worldwide, from buy to hold. Strengths include its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

EPS are up 25% in the most recent quarter compared with the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year, and we feel that this trend should continue, suggesting that the performance of the business is improving. During the past fiscal year, Perot increased its bottom line by earning 92 cents vs. 66 cents in the prior year. This year, the market expects an improvement in earnings to 97 cents. Net income growth of 20% to $30 million from the same quarter last year significantly exceeded that of the S&P 500 and the IT services industry.

Return on equity has improved slightly but is below that of the industry average and the S&P 500. Perot's gross profit margin for is rather low at 17.40%, having decreased from the same quarter the previous year.

We've downgraded Pharmaceutical Product Development(PPDI Quote) from buy to hold. Strengths include its revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we find that the stock has had a decline in price during the past year.

PPD's revenue growth of 11.6% since the same quarter last year has slightly outpaced the industry average of 4.5%, appearing to boost EPS. ROE also has improved slightly when compared to the same quarter one year prior, which can be construed as a modest strength in the organization. Its return on equity exceeds that of both the industry average and the S&P 500. Net income growth of 33.9% from the same quarter one year ago has significantly exceeded that of the S&P 500 and the life sciences tools and services industry.