TSC Ratings' Updates: Chesapeake Energy

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 Tuesday, May 5.

We've upgraded TD Ameritrade Holding(AMTD Quote) from hold to buy, driven by its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

The 0.5 debt-to-equity ratio is below the industry average. TD Ameritrade's 48.9% gross profit margin has decreased from the same period last year. Its net profit margin of 25% outperformed the industry average. Revenue fell 24.1% since the year-ago quarter, and EPS are down 25.8%. We think the company is likely to report a decline in earnings in the coming year. Return on equity also fell compared with the year-ago quarter.

We've downgraded Chesapeake Energy(CHK Quote) from hold to sell, driven by its deteriorating net income, generally weak debt management, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Net income fell from -$132 million in the year-ago quarter to -$5.7 billion in the most recent quarter. The 1.1 debt-to-equity ratio is relatively high compared with the industry average. ROE has decreased from the year-ago quarter. Net operating cash flow fell 15.8% to $1.3 million compared with the year-ago quarter.

Shares have tumbled 56.7% over the past year, underperforming the S&P 500, and EPS are down. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy