TSC Ratings' Updates: United Online

The following ratings changes were generated on Thursday, March 19.

We've upgraded Retalix(RTLX), which provides integrated enterprise-wide software solutions, from sell to hold. Strengths include the company's impressive record of earnings per share growth, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, we find that the stock has had a generally disappointing performance in the past year.

Retalix 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 year that we feel should continue, suggesting that the performance of the business is improving. Net income rose from -$1.7 million in the year-ago quarter to $2 million in the most recent quarter, significantly exceeding the net income growth of the S&P 500 and the software industry. Revenue dropped by 5.4%, but the company still outperformed the industry average of 7.5% growth. Return on equity improved slightly, which can be construed as a modest strength in the organization.

Shares have plunged by 41.5% over the past year, dragged down in part by the decline in the S&P 500. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

We've downgraded Sun Healthcare Group(SUNH), which provides nursing, rehabilitative and related specialty health care services, from buy to hold. Strengths include the company's revenue growth, notable return on equity and attractive valuation levels. However, we find that the company has not been very careful in the management of its balance sheet.