Stock Upgrades, Downgrades From TheStreet.com Ratings
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.
The following ratings changes were generated on April 1.
Perot Systems
(PER) - Get Report
, a provider of information technology services and business solutions, has been upgraded to buy. For the fourth quarter, revenue rose 18% year over year to $706 million, and earnings per share improved to 35 cents from 26 cents. Net income increased 38% year over year to $44 million.
For 2008, the market expects an improvement in full-year EPS to 96 cents from 92 cents in 2007. The company's debt-to-equity ratio is very low at 0.17, implying very successful management of debt levels. In addition, its quick ratio of 2.08 demonstrates an ability to cover short-term liquidity needs. Perot Systems had been rated hold since Nov. 27.
The
New York Times Co.
(NYT) - Get Report
, a diversified media company, has been upgraded to hold. An impressive record of earnings per share growth, compelling improvement in net income and notable return on equity are offset by poor debt management, weak operating cash flow and a disappointing stock-price performance. For the fourth quarter, earnings per share swung to a profit of 37 cents from a loss of $4.59.
For 2008, the market expects an improvement in full-year EPS to $1.04 from 76 icents n 2007. Return on equity greatly increased from the year-ago quarter to 11%. On the other hand, net operating cash flow has decreased 62% to $81.6 million and the company's cash flow growth rate lags the industry average. Furthermore, the debt-to-equity ratio of 1.06 is high, and its quick ratio of 0.50 demonstrates an inability to cover short-term liquidity needs. The New York Times Co. had been rated sell since Dec. 7.
Apollo Group
(APOL)
, a provider of educational programs at high school, college, and graduate levels whose subsidiaries include the University of Phoenix, has been downgraded to hold. Strengths such as revenue growth, good cash flow from operations and expanding profit margins are countered by deteriorating net income and disappointing return on equity.
For the second quarter of its fiscal 2008, the company posted year-over-year revenue growth of 14% to $693.6 million. Earnings per share swung to a loss of 19 cents from a profit of 35 cents. Net operating cash flow has increased to $101.6 million, and its cash flow growth rate greatly exceeded the industry average. At 56%, Apollo's gross profit margin is rather high, but its net profit margin of -4.6% trails the industry average. Return on equity has decreased in the past year to 39%, a rate that lags the sector average. Apollo Group had been rated buy since July 12.
Enbridge Energy Partners
(EEP)
, which owns and operates crude oil and liquid petroleum transportation and storage assets, has been downgraded to hold. Robust revenue growth and an increase in net income are balanced by poor debt management, disappointing return on equity and poor profit margins. For the fourth quarter, revenue rose 28% year over year to $2.12 billion, but earnings per share fell to 23 cents from 56 cents.
For 2008, the market expects an improvement in full-year EPS to $3.00 from $2.07 for 2007. The company's gross profit margin is extremely low at 11%, and its net profit margin of 3% trails that of the industry average. Net operating cash flow has decreased 50% to $45.5 million from the year-ago quarter. Enbridge Energy Partners had been rated buy since July 25, 2006.
Southern Union
( SUG), which gathers, processes, stores and distributes natural gas, has been downgraded to hold. Strengths such as revenue growth and a reasonable valuation are weighed down by weak growth in net income, poor debt management and disappointing return on equity. For the fourth quarter, revenue increased 6.9% year over year to $722.9 million, but earnings per share declined to 41 cents from 94 cents.
For 2008, however, the market expects an improvement in full-year EPS to $1.87 from $1.76 for 2007. The company's debt-to-equity ratio of 1.59 is quite high, and its quick ratio of 0.25 clearly demonstrates an inability to cover short-term cash needs. Return on equity has slightly decreased from the year-ago quarter to 9.6%. This rate of return, which lags the industry average and that of the S&P 500, implies a minor weakness in the organization. Southern Union had been rated buy since June 23, 2006.
Additional ratings changes from April 1 are listed below.
Ticker | Company Name | Change | New Rating | Former Rating |
APOL | Apollo Group | Downgrade | Hold | Buy |
CWCO | Consolidated Water | Downgrade | Hold | Buy |
EE | El Paso Electric | Downgrade | Hold | Buy |
FOE | Ferro | Downgrade | Sell | Hold |
EEP | Enbridge Energy Partners | Downgrade | Hold | Buy |
NCI | Navigant Consulting | Upgrade | Buy | Hold |
NYT | New York Times Co. | Upgrade | Hold | Sell |
PER | Perot Systems | Upgrade | Buy | Hold |
RFMI | RF Monolithics | Downgrade | Sell | Hold |
SIVB | SVB Financial Group | Downgrade | Hold | Buy |
SUG | Southern Union | Downgrade | Hold | Buy |
UNS | Unisource Energy | Downgrade | Hold | Buy |
FADV | First Advantage | Upgrade | Buy | Hold |
FCLF | First Clover Leaf Financial | Upgrade | Buy | Hold |
GMKT | GMarket | Upgrade | Hold | Sell |
DAC | Danaos | Downgrade | Sell | Hold |
This article was written by a staff member of TheStreet.com Ratings.