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.
Movie rental retailer
( BBI) has been downgraded to sell from hold. The company lost 27 cents per share in the first quarter of fiscal 2007 after earnings 4 cents per share a year earlier. Net operating cash flow has decreased significantly during that same time period. In light of these weaknesses, the stock has fallen 44.6% in just the past three months. Blockbuster had been rated a hold since March 2007.
Real estate investment trust
has been downgraded to hold from buy. The company's 29% gross profit margin is lower than what is desirable. The company's stock has risen in value by 8.6% in the past year, bringing it to a point where it is in line with the industry average in terms of its price-to-earnings ratio. TheStreet.com Ratings feels this tends to reduce its upside potential. Duke Realty had been rated a buy since August 2006.
has also been downgraded to hold from buy. The company develops Web filtering software that helps companies manage their computing resources. Websense's earnings per share fell 43.8% in the first quarter of fiscal 2007 compared with the year-earlier period. Net operating cash flow dropped nearly 35% during that same time frame. The company's current 14.8% return on equity lags behind the Internet software and services industry average of 18.2%. Websense had been rated a buy since June 2005.
Oilfield services company
( PGS) has been upgraded to a buy from a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, notable return on equity, expanding profit margins and good cash flow from operations. The market is expecting more earnings increases in the coming year, which could push the stock price even higher even though it has already gained 33.7% in the past 12 months. PGS had been rated a hold since March 2007.
TheStreet.com Ratings has initiated coverage of Canadian energy trust
( CNE) with a sell rating. The company lost 3 cents per share in the first quarter of fiscal 2007 after earnings 25 cents per share in the same quarter a year ago. Canetic's stock performance has been disappointing over the past 12 months, with shares losing 19.7% of their value. In spite of this, the company remains relatively expensive compared with its competitors. TheStreet.com Ratings sees little in CNE's numbers that could cause the stock price to go up.
Some recent rating changes are highlighted below