TSC Ratings' Updates: Diamond Foods

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

The following ratings changes were generated on Wednesday, April 1.

We've upgraded convenience store operator Casey's General Stores(CASY) from hold to buy, driven by its growth in earnings per share, increase in net income, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

EPS 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 positive EPS growth should continue. Net income increased by 7.6%, from $13 million in the year-ago quarter to $14 million. Net operating cash flow increased by 72.5% to $32.5 million.

Shares have risen over the past year at a faster pace than the S&P 500. Even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

We've upgraded branded food company Diamond Foods(DMND) from hold to buy, driven by its revenue growth, impressive record of earnings per share growth, compelling growth in net income, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins.

Revenue rose by 12.5% since the same quarter last year. EPS also improved, and we feel that the company's two-year trend of EPS growth should continue. Net income increased by 129.8% compared with the year-ago quarter, rising from $2.7 million to $6.1 million. Net operating cash flow increased 6.3% to $67.7 million.