Note: Our quantitative model makes stock recommendations based on GAAP figures that may differ materially from data as reported by the companies themselves. As a result, rating changes are occasionally driven by so-called nonrecurring items. As always, we urge readers to use TSC Ratings' reports in conjunction with additional information to construct their opinions on the value that should be placed on any given stock.
The following ratings changes were generated on Tuesday, March 31.
We've upgraded Cerner (CERN), which provides healthcare information technology solutions, health care devices and related services, from hold to buy. This rating is driven by the company's revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.
Revenue rose by 18.1% since the year-ago quarter. The company has a debt-to-equity ratio of 0.1, though it is still higher than the industry average. Its quick ratio is 2.3. EPS rose in the most recent quarter compared with the same quarter a year ago, and we anticipate the company's two-year trend of EPS growth to continue. Net income increased 73.1% compared with the year-ago quarter, from $41.3 million to $71.5 million.Shares have risen over the past year, outperforming the S&P 500. Even the best stocks can fall in an overall down market, but in any other environment, this stock still has good upside potential. We've downgraded Circor International (CIR), which designs, manufactures, and distributes valves and related fluid-control products, from hold to sell. This rating is driven by the company's deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself. Net income fell to -$110.1 million from $10.1 million in the same quarter last year. Return on equity also decreased. Circor's gross profit margin is 32.9%, though it has increased from the year-ago quarter. Its net profit margin of -54.5% is below the industry average. Net operating cash flow fell 21.9% to $28.7 million compared with the year-ago quarter.
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