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TSC Ratings' Updates: Winn-Dixie

The following ratings changes were generated on Monday, Dec. 15.

We've downgraded solid waste services company Casella Waste Systems (CWST) from hold to sell, driven by its unimpressive growth in net income, generally weak debt management and generally disappointing historical performance in the stock itself.

Net income has significantly decreased by 27% since the same quarter a year ago, to $2.1 million,, underperforming the commercial services and supplies industry but outperforming the S&P 500. The debt-to-equity ratio is very high at 4.2 and currently higher than the industry average, implying very poor management of debt levels within the company. Casella also maintains a poor quick ratio of 0.7, which illustrates the inability to avoid short-term cash problems. Current return on equity exceeded its ROE from the same quarter one year prior, a clear sign of strength within the company. Casell'as gross profit margin of 35.3% is strong, though it has decreased from the same period last year. The net profit margin of 1.30% trails the industry average.

Shares havv tumbled by 75.3% over the past year, underperfomring the S&P 500. Consistent with the plunge in the stock price, the company's earnings per share are down 46.7% compared with the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor, and in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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