TSC Ratings' Updates: Massey Energy

The following ratings changes were generated on Wednesday, Feb. 4.

We've upgraded Compuware(CPWR), which provides software products, professional services and application services to IT organizations and IT service providers worldwide, from hold to buy. This rating is driven by the company's growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Earnings per share have improved by 7.7% in the most recent quarter compared with the year-ago quarter, and we feel that the company's two-year pattern of EPS growth should continue. Return on equity also improved slightly compared with the year-ago quarter, outperforming the S&P 500 but underperforming the software industry.

Compuware has no debt to speak of, and the company maintains an adequate quick ratio of 1.25, which illustrates its ability to avoid short-term cash problems. The 66.8% gross profit margin is rather high, having increased from the same quarter the previous year, but the 13% net profit margin trails the industry average.

We've downgraded Lam Research(LRCX), which engages in the design, manufacture, marketing, and service of semiconductor processing equipment used in the fabrication of integrated circuits, from hold to sell. This rating is driven by the company's feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.