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.
( CAV), a manufactured home company, has been downgraded to sell from hold. The company has shown feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and weak operating cash flow.
Cavalier Homes has experienced a steep decline in earnings per share in the most recent quarter in comparison with its performance from the same quarter a year ago. Earnings per share have declined over the last two years. Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. It had been rated a hold since August 2006.
, which provides engineering solutions for the optimization of combustion systems in utility and industrial applications, has been upgraded to buy from hold. The company has a largely solid financial position with reasonable debt levels by most measures, solid stock price performance and expanding profit margins.
TheStreet.com Ratings feels these strengths outweigh the fact that the company has had sub-par growth in net income. The company has no debt to speak of, resulting in a debt-to-equity ratio of zero. Along with this, the company maintains a quick ratio of 4.28, which clearly demonstrates the ability to cover short-term cash needs. Fuel Tech had been rated a hold since June 4.
Steiner Leisure Limited
, which provides spa services and products to cruise line and resort customers, has been upgraded to buy from hold. The company has shown robust revenue growth, reasonable debt and valuation levels, good cash flow from operations and solid stock price performance.
Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems. The company has improved earnings per share by 5.1% in the most recent quarter compared to the same quarter a year ago. Steiner has demonstrated a pattern of positive earnings per share growth over the past two years. The company had been rated a hold since June 29.
BioDelivery Sciences International
, a specialty biopharmaceutical company, has been downgraded to sell from hold. The company has shown deteriorating net income and feeble growth in its EPS.
BioDelivery Sciences has experienced a steep decline in EPS in the most recent quarter compared with its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. Since the same quarter one year prior, revenues fell by 10.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.The company had been rated a hold since March 8.
Discovery Holding Company
, which provides creative and network services to the media and entertainment industries, has been upgraded to buy from hold. The company has a largely solid financial position with reasonable debt levels, solid stock price performance, increases in net income and revenue and growth in EPS.
Powered by strong earnings growth and other important driving factors, this stock has surged over the past year. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year. The company was initiated with a hold rating in August 2006.