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 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.
Civil and defense airplane manufacturer
Empresa Brasileira de Aeronautica
has been downgraded to a sell from a buy. Net income decreased 59.9% in the first quarter of 2007 compared with the same period last year. While its share price has jumped 52.9% from its closing price one year ago, the sharp appreciation is one of the factors that should prompt investors to seek better opportunities elsewhere.
The company saw a steep EPS decline in the first quarter of 2007 compared with the same quarter in 2006 -- a trend that has been going on for the past two years. Empresa Brasileira de Aeronautica had been rated a buy since October 2006.
( NHRX) provides medical products and prescription-related services to Medicare and managed-care beneficiaries. It has been downgraded to a sell from a hold. Despite that the share price has gone down 45.2% in the past year, the stock is still more expensive (when compared with current earnings) than most other companies in its industry.
The company's net profit margin of 6.3% trails the industry average. Nationshealth had been rated a hold since May 2007.
Stereo headphones manufacturer
has been downgraded to a hold from a buy. Its EPS declined 50% in the third quarter of 2007 compared with the same period last year. The company also has failed to demonstrate a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year.
Since the same quarter one year prior, revenue fell by 27.2% in the third quarter of this year. Share price has declined by 19.8% in the past 12 months. Koss had been rated a buy since October 2006.
, the holding company for Citizens and Farmers bank, has been downgraded to a hold from a buy. The company's EPS declined by 19.5% in the first quarter of 2007 from the same quarter last year, and it has reported somewhat volatile earnings recently and is likely to report a decline in earnings in the coming year.
Net income has decreased by 20.4% in the first quarter when compared with a year ago, dropping from $2.53 million to $2.01 million. C&F had been rated a buy since January 2007.
Crude oil and natural gas producer
( TXCO) has been upgraded to a buy from a hold. Its debt-to-equity ratio of 0.19 is very low and is currently below that of the industry average, implying that there has been very successful management of debt levels.
Net operating cash flow increased 348.1% to $1 million in the first quarter of 2007 compared with the same quarter last year. Although the company has suffered a declining pattern of EPS over the past year, TheStreet.com Ratings anticipate this trend reversing over the coming year. Txco had been rated a hold since March 2007.
Max & Erma's Restaurants
, which own and operate about 80 of their eponymous eateries, has been downgraded to a sell from a hold. Net income fell to a loss of $100,000 in the second quarter of 2007, from a $0.16 million gain in the second quarter of 2006.
Its debt-to-equity ratio is 3.22 and currently higher than the industry average, implying that there is poor management of debt levels within the company. Compared to where it was 12 months ago, the stock increased 5.1%, but the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry reduce its upside potential. It had been rated a hold since April 2007.
Medication-dispensing systems manufacturer
MTS Medication Technologies
( MPP) has been upgraded to a buy from a hold. Revenue rose by 24.1% in the fourth quarter of its fiscal 2006.
The company's stock price has surged by 98.2% over the past year, and should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year. Net income in the quarter increased 120.8% when compared with the same quarter one year prior. MTS had been rated a hold since February 2007.
Perma-Fix Environmental Services
, a waste management company, has been downgraded to a hold from a buy. The company experienced an EPS decline in the first quarter of 2007 and has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. Its net profit margin of -5.4% is significantly below that of the industry average. Perma-Fix had been rated a buy since March 2007.
Some recent rating changes are highlighted below.