TSC Ratings' Updates: Winn-Dixie

We've downgraded newspaper, magazine and Web site publisher Daily Journal(DJCO Quote) 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 we feel that the company's cash flow from its operations has been weak overall.

Daily Journal reported significant earnings per share improvement 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 two years. During the past fiscal year, it increased its bottom line by earning $3.66 vs. $1.68 in the prior year. The net income growth of 89.2% from the same quarter one year ago has significantly exceeded that of the S&P 500 and the media industry. Net operating cash flow has decreased to $1.45 million, or 24.53% when compared with the same quarter last year. In addition, compared with the industry average, the firm's growth rate is much lower.

Shares are off by 29.7% on the year, but the stock's decline was actually not as bad as the broader market plunge during that same time frame. 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.

We've upgraded Nippon Telegraph & Telephone(NTT Quote), which provides fixed and mobile voice related, IP/packet communications, system integration and other telecommunications related services, from hold to buy, driven by its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and attractive valuation levels. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.