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.
Global energy company
Royal Dutch Shell
has been downgraded to hold from buy. The company's performance is mixed, with little evidence to justify the expectation of either positive or negative stock price movement relative to other stocks. Its strengths include increased net income, revenue growth and EPS growth of 22.1% in the second quarter of 2007 compared with the same period last year.
As a counter to these strengths, Royal Dutch Shell demonstrates poor profit margins and its stock price has declined 1.74% in the past 12 months. The company had been rated buy since July 2007; before that, it had a hold rating since TheStreet.com Ratings initiated coverage in August 2006.
produces and sells crude steel and related products. It has been upgraded to buy from hold. The company shows revenue growth and a largely solid financial position with reasonable debt levels by most measures. In addition, its stock price has increased by 35.91% in the last year, exceeding the performance of the broader market. It should continue to move higher.
The company has reported somewhat volatile earnings over the past year, but it is poised for EPS growth in the coming year. These strengths outweigh the company's subpar net income growth. Gerdau had been rated a hold since September 2006.
Ambac Financial Group
provides financial guarantee products and other financial services to clients in the public and private sectors. It has been downgraded to hold from buy. Among the company's primary strengths are its expanding profit margins.
However, it also displays a number of weaknesses, including deteriorating net income, generally poor debt to equity management and a disappointing return on equity. Given the mixed performance, there is little to justify the expectation of either a positive or negative performance for its stock relative to other stocks. Ambac had been rated buy since August 2005.
Brazilian poultry, pork and processed foods company
has been downgraded to hold from buy. The company shows a number of strengths, such as net income growth, stock price that has grown 38.51% in the last year and revenue growth that increased 51.1% in the second quarter compared with the same period in 2006. On the other hand, its return on equity of 11.55% trails that of both the industry average and the
. Perdigao had been rated buy since July 2007.
is an investment firm specializing in mezzanine and senior secured loans to middle market companies. It has been downgraded to hold from buy. The company shows a number of strengths, including a largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and revenue growth of 76.3% in the final quarter of its fiscal 2007 compared with the same quarter last year.
However, Apollo has displayed a disappointing return on equity and a net income loss of 4.08% in the fourth quarter of its fiscal year compared with the same period last year. Apollo Investment Corporation had been rated buy since October 2006.
Additional ratings changes are listed below.