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 company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.
Cincinnati, Ohio regional bank
Fifth Third Bancorp
has been upgraded to a buy from a hold. TheStreet.com Ratings feels the company's profit margins are rather high. Revenue was up 4.6% in the first quarter of fiscal 2007 compared with the year-earlier period.
Although earnings have remained relatively flat over the past two years, analysts are expecting future improvement in this area. Fifth Third Bancorp's stock price has gained 9.6% over the past 12 months. FITB had been rated a hold since June 2005.
Internet service provider
has been downgraded to a sell from a hold. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and the generally disappointing historical performance in the stock itself.
Although the fact that this stock is now selling for less than others in its industry may make it attractive to some investors, TheStreet.com Ratings feels this is not reason enough to justify a buy rating at this time. Earthlink had been rated a hold since March 2006.
Specialty jewelry retailer
has been downgraded to a hold from a buy. The company's net income fell 9.5% in the first quarter of fiscal 2007 compared to the same quarter a year ago. Net operating cash flow has also declined significantly over that same time period.
TheStreet.com Ratings feels that Signet's 10.6% gross profit margin is extremely low and the net profit margin of 4% trails the industry average. SIG had been rated a buy since August 2006.
Insurance and reinsurance firm
Endurance Specialty Holdings
has been upgraded to a buy from a hold. The company's current 20.2% return on equity far exceeds the industry average of 10.3%. The gross profit margin increased to 37.3% in the first quarter of fiscal 2007 over the year-earlier period and the net profit margin of 22.9% is higher than many of Endurance's peers.
As a result of these and other strengths, investors have pushed the stock price up 22.6% in the past year. ENH had been rated a hold since May 2007.
Commercial real estate services firm
CB Richard Ellis
has been boosted to a buy from a hold. Revenue increased significantly in the first quarter of fiscal 2007, jumping 61.6% over the year-earlier period. So far, this growth has not trickled down to the bottom line. Earnings per share actually decreased during the same time period, but analysts are expecting EPS improvements in the coming year.
The company's stock price has shot up 50.9% over the past 12 months, and TheStreet.com Ratings expects it will continue to go higher. CB Richard Ellis had been rated a hold since May 2007.
Some recent rating changes are highlighted below.