Analog Devices, Westar: Ratings Changes

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BOSTON (TheStreet) -- TheStreet.com's stock-rating model upgraded chipmaker Analog Devices(ADI Quote) to "buy."

The numbers: Fiscal third-quarter net income dropped 53% to $66 million, or 22 cents a share. Revenue decreased 25% to $492 million. Its gross margin declined from 67% to 61% and its operating margin fell from 25% to 16%. Analog Devices has a strong financial position, with $1.7 billion of cash, compared to $375 million of debt. A quick ratio of 5.6 and debt-to-equity ratio of 0.2 demonstrate fiscal prudence.

The stock: Analog Devices has climbed 53% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 30, a discount to chipmakers, but a premium to the market. The shares have a 2.8% dividend yield.

The model upgraded investment bank Piper Jaffray(PJC Quote) to "hold."

The numbers: The company swung to a second-quarter profit of $12 million, or 59 cents a share, from a loss of $70,000, or 9 cents a share, in the year-earlier period. Revenue grew 30% to $134 million. Its gross margin rose from 5% to 20% and its operating margin climbed from 2% to 18%. Piper has adequate liquidity, with $237 million of cash. A debt-to-equity ratio of 0.4 indicates conservative leverage.

The stock: Piper Jaffray is up 22% this year, beating the Dow Jones Industrial Average and S&P 500 Index. The company posted net losses in the previous five reporting periods and doesn't pay dividends.

The model upgraded data-hosting specialist Rackspace Hosting(RAX Quote) to "hold."

The numbers: Second-quarter profit increased 67% to $7 million, or 6 cents a share, as revenue increased 16% to $152 million. Its gross margin rose from 67% to 68% and its operating margin climbed from 6% to 9%. A quick ratio of 1 reflects adequate liquidity. A debt-to-equity ratio of 0.7 indicates reasonable leverage.