TSC Ratings' Updates: Hot Topic

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, June 3.

We've upgraded American Financial Group(AFG Quote) from hold to buy, driven by its revenue growth, increase in net income, good cash flow from operations, growth in earnings per share 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 increased by 0.4% since the year-ago quarter, and EPS improved by 37.5%. We feel the company is poised for EPS growth in the coming year. Net income increased by 36.6% compared with the year-ago quarter, from $76 million to $103.8 million. Net operating cash flow increased to $422 million, or by 14.1%. AFG's debt-to-equity ratio of 0.4 is above the industry average.

We've upgraded Heico(HEI 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 has had lackluster performance in the stock itself.

Heico's debt-to-equity ratio of 0.1 is low but above the industry average, and it maintains a quick ratio of 1.3. ROE has improved slightly compared with the year-ago quarter. Heico's 35.3% gross profit margin had decreased from the year-ago period. Its 8.1% net profit margin compared favorably with the industry average. Revenue fell 9.6% since the same quarter last year, and EPS decreased. Net income fell 11.8%, from $12 million to $10.5 million.