Each weekday, 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 forecast company earnings. Objective elements include volatility of past operating revenue, financial strength and company cash flows.
Discount retail giant
has been downgraded to a hold from a buy, which it had maintained since October 2006. The company's net operating cash flow fell 50.6% in the first quarter of 2007 compared to the same quarter a year ago.
While sales and net income have grown faster than the industry average over the past fiscal year, the company's gross profit margin remains largely unchanged. TheStreet.com Ratings feels Wal-Mart has weak liquidity and could struggle to meet short-term cash needs.
Casino owner and operator
has been upgraded to a buy from a hold. TheStreet.com Ratings is impressed with the company's aggressive expansion plans. Pinnacle recently purchased gambling properties in St. Louis, Mo. and Atlantic City, N.J. and announced plans for a major expansion and renovation of its facility in New Orleans.
A strong liquidity position has helped to make these moves possible. At the end of the first quarter of 2007, Pinnacle had $441.3 million in cash and equivalents, as well as around $700 million unutilized out of the company's $1 billion bank credit facility. Pinnacle had been rated a hold since March 2007.
has been downgraded to a hold from a buy. The company's net income fell 67.5% in the first quarter of fiscal 2007 compared to the same quarter a year ago.
Newmont's 34.2% gross profit margin has also been declining, which TheStreet.com Ratings feels is lower than what is desirable. Given these weaknesses, it is not surprising that the stock price has taken a hit, tumbling almost 26% over the past 12 months. Newmont had been rated a buy since May 2005.
( WEBM) has been upgraded to a hold from a sell. The company develops business integration and optimization software. TheStreet.com Ratings feels the company is in a solid financial position with no debt to speak of. WebMethods' stock price has jumped 26.8% over the past three months. The company had been rated a sell since February 2007.
Semiconductor equipment manufacturer
has been downgraded to a hold from a buy. Earnings per share dropped 56.3% in the first quarter of 2007 compared to the first quarter of 2006. Cohu's return on equity of 6.1% is well below the industry average of 16.8%. The company had been rated a buy since November 2006.
Some recent rating changes are highlighted below.