TSC Ratings' Updates: Hudson City Bancorp

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 12.

We've updated Copart(CPRT Quote) from hold to buy, driven by its largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

The company's quick ratio of 1.7 demonstrates strong liquidity. Return on equity improved slightly compared with the year-ago quarter, which can be construed as a modest strength. The 44.3% gross profit margin decreased from the year-ago quarter. The 16% net profit margin outperformed the industry average. Revenue fell 2.6% from the year-ago quarter, and EPS are down. Net income fell 15.2%, from $32 million in the year-ago quarter to $27.2 million.

We've upgraded Donaldson(DCI Quote) from hold to buy, driven by its largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

The debt-to-equity ratio of 0.6 is below the industry average, and the quick ratio of 1.1 illustrates the company's ability to avoid short-term cash problems. ROE had improved slightly compared with the same quarter last year, implying a modest strength. Net operating cash flor increased by 72.1% to $42.1 million. Revenue dropped by 9.9%, but EPS improved. However, we anticipate underperformance in the coming year relative to the company's two-year pattern of positive EPS growth.