TSC Ratings' Updates: Yahoo!

Net income increased by 13.9% compared with the same quarter a year ago, outperforming the S&P 500 and the chemicals industry. Revenue increased by 6.6% compared with the industry average of 12% growth. EPS are up 14.3% in the most recent quarter compared with the year-ago quarter. This company has reported somewhat volatile earnings recently, but we feel it is poised for EPS growth in the coming year.

ROE greatly decreased compared with the year-ago quarter, underperforming both the industry and the S&P 500. Scotts' gross profit margin of 28.6% is lower than desirable, having decreased from the same quarter last year. Its net profit margin of -6.4% significantly trails the industry average.

We've downgraded Yahoo!(YHOO) from hold to sell, driven by its generally disappointing historical performance in the stock itself, deteriorating net income, disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share.

Net income decreased by 247.5% compared with the year-ago quarter, significantly underperforming the S&P 500 and the internet software and services industry. ROE slightly decreased, implying a minor weakness within the organization. Net operating cash flow has decreased to $321.01 million, or by 48.38%, and EPS declined by 246.7. Yahoo! has reported a trend of declining earnings per share over the past two years, but the consensus estimate suggests that this trend should reverse in the coming year.

Shares are down 48.3% over the year, underperforming the S&P 500, but the stock is still more expensive (when compared with its current earnings) than most other companies in its industry.

Other ratings changes include Sterling Financial(STSA) and SL Green Realty(SLG), both downgraded from hold to sell.

All ratings changes generated on Jan. 28 are listed below.

Ticker Company Current Change Previous ABEW Airbee Wireless SELL Initiated ASH Ashland SELL Downgrade HOLD AVLY Allegheny Valley Bancorp SELL Initiated AZN AstraZeneca BUY Upgrade HOLD FCBC First Community Bancshares HOLD Downgrade BUY GSBC Great Southern Bancorp HOLD Upgrade SELL OFI Overhill Farms BUY Upgrade HOLD PHG Philips Electronics SELL Downgrade HOLD PLT Plantronics SELL Downgrade HOLD PSDV Psivida SELL Initiated PVTB PrivateBancorp SELL Downgrade HOLD SLG SL Green Realty SELL Downgrade HOLD SMG Scotts Miracle-Gro HOLD Upgrade SELL SPCK SuperClick HOLD Upgrade SELL STSA Sterling Financial SELL Downgrade HOLD WR Westar Energy BUY Upgrade HOLD YHOO Yahoo! SELL Downgrade HOLD

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.

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