TSC Ratings' Updates: Archer Daniels

The following ratings changes were generated on Thursday, Dec. 11.

We've upgraded Archer Daniels Midland(ADM Quote) from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

Revenue leaped by 65% since the same quarter a year ago, outpacing the industry average of 35.7% growth and boosting EPS. ADM's debt-to-equity ratio is somewhat low at 0.63 and is less than that of the industry average, implying a relatively successful effort in the management of debt levels. The company also maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems. Net income growth of 138.1% from the same quarter one year ago has significantly exceeded that of the S&P 500 and the food products industry. Net operating cash flow has significantly increased by 486.77% to $4,680.00 million when compared with the same quarter last year, but cash flow growth rate is still lower than the industry average growth rate of 521.62%.

We've downgraded AmSurg(AMSG Quote), which engages in the development, acquisition, and operation of ambulatory surgery centers, from buy to hold. Strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a decline in price during the past year.