TSC Ratings' Updates: Diamond Foods

Shares have tumbled 77% over the past year, underperforming the S&P 500. Naturally, the overall market trend is bound to be a significant factor, and in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

We've downgraded Steelcase (SCS), which engages in the design, manufacture and marketing of office furniture, 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 decreased from $30.6 million in the year-ago quarter to -$65.7 million in the most recent quarter. ROE also decreased, which could signal weakness in the corporation. Steelcase's gross profit margin of 30.5% has decreased from the year-ago quarter, and its net profit margin of -10% is below the industry average. Net operating cash flow fell to -$8 million in the most recent quarter.

Shares have tumbled by 54.7% over the past year, underperforming the S&P 500, and EPS were also down compared with the year-ago quarter. Naturally, the overall market trend is bound to be a significant factor, and in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

Other ratings changes include MetroGAS (MGS), downgraded from hold to sell, and NetScout (NTCT), downgraded from buy to hold.

All ratings changes from April 1 are listed below.

Ticker Company Current Change Previous CASY Casey's General Stores BUY Upgrade HOLD DMND Diamond Foods BUY Upgrade HOLD EDNE Eden Energy SELL Initiated FREE FreeSeas HOLD Upgrade SELL GIII G-III Apparel Group SELL Downgrade HOLD HIMX Himax Technologies HOLD Upgrade SELL MGS MetroGAS SELL Downgrade HOLD NNBR NN SELL Downgrade HOLD NTCT NetScout Systems HOLD Downgrade BUY OPY Oppenheimer Holdings SELL Downgrade HOLD SBGI Sinclair Broadcast Group SELL Downgrade HOLD SCS Steelcase 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.

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.

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