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.
, an industrial services company, has been upgraded to buy. The company maintains a largely solid financial position with reasonable debt levels, good cash flow from operations, and impressive growth in revenue, earnings per share and net income. These strengths are expected to outweigh the company's low profit margins. Matrix recently posted a 110% increase in fiscal year 2008 first-quarter earnings to $6.34 million. Revenue climbed 27.2% to $161.3 million. Net operating cash flow has significantly increased by 213.67% to $1.21 million. Matrix Service had been rated hold since August.
has been downgraded to hold. While the company enjoys a largely solid financial position with reasonable debt and valuation levels and acceptable revenue growth, it has also been marked by unimpressive net income growth, unsatisfactory return on equity and a generally disappointing stock performance. For the quarter ended June 30, net income dropped 19.5% from a year ago to $5.14 million. The company's current return on equity slightly decreased from the same quarter one year earlier. Celadon Group had been rated buy since October of 2005.
( HMX), which makes casual and golf apparel, has been downgraded to sell due to its generally disappointing historical stock performance and substandard return on equity. The company's stock share price has done very poorly, falling 25.9% over the past year. Despite the heavy decline in its share price, this stock is still more expensive -- when compared with its current earnings -- than most other companies in its industry. Third-quarter net income increased 10.6% to $542,000, or 1 cent a share from a year ago. Revenue dropped 2% to $135.2 million. Hartmarx had been rated hold since Oct. 1.
, a water and wastewater service provider, has been upgraded to hold. Although the company maintains a largely solid financial position with reasonable debt levels, a solid stock price performance, and expanding profit margins, it is also marked by deteriorating net income, disappointing return on equity and weak operating cash flow. The company posted a third-quarter loss of about $5.2 million, or 28 cents a share, compared with a loss of about $713,700, or 5 cents a share, a year earlier, significantly underperforming the water utilities industry. Return on equity has slightly decreased from the same quarter one year prior. Pure Cycle had been rated sell since February.
, an apparel company, has been upgraded to hold. While the company has demonstrated robust revenue growth, impressive EPS growth and compelling growth in net income, cash flow from its operations has been weak. It swung to a profit in the third-quarter, reporting net income of $913,000, or 2 cents a share, compared with a loss of $524,000 or 1 cent a share a year ago. Net sales increased 26% to $15.7 million. However, the company's stock has appreciated sharply over the last year, and this is one factor that should prompt investors to seek better opportunities elsewhere. Innovo Group had been rated sell since October 2005.
Additional ratings changes are listed below.