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.
Online auction site
has been downgraded to a hold. While the company has enjoyed a largely solid financial position with reasonable debt levels, robust revenue growth and good cash flow from operations, it has also been plagued by deteriorating net income and disappointing return on equity.
For the third quarter, the online auctioneer said it lost $936 million, or 69 cents a share due to a writedown in the value of its Skype Internet phone division. Excluding the writedown and other items, eBay earned $564 million, or 41 cents share, up 53% year over year. Revenue increased 30% to $1.89 billion, trailing the industry average of 56.2%. Current return on equity is lower than its ROE from a year ago. eBay had been rated a buy since September.
, which makes outdoor apparel, has been downgraded to hold. Operating from a largely solid financial position, the company has seen revenue grow and net income increase. However, Columbia has also reported unsatisfactory return on equity and weak operating cash flow, and the performance of its stock has been generally disappointing.
In July the company said second-quarter net income increased 107.7% from a year ago to $10.04 million. Revenue increased 3% to $218.6 million, below the industry average of 7.5%. Net operating cash flow decreased 48.4% from a year ago to $20.1 million and return on equity has slightly decreased. Columbia Sportswear had been rated a buy since October 2006.
, which makes automated teller machines and cash dispensers, has been downgraded to a hold. The company's strengths can be seen in several areas, such as its revenue growth, largely solid financial position with reasonable debt and valuation levels. However, operating cash flow has been weak and return on equity has been disappointing.
NCR's second-quarter income rose 26% to $98 million, or 54 cents a share. Revenue increased 5% to $1.61 billion. Return on equity has slightly decreased from a year ago. NCR had been rated a buy since October 2005.
( BRNC), which provides contract land drilling services to oil and natural gas exploration companies, has been downgraded to a sell. The company has been hampered by an unimpressive growth in net income, a disappointing historical performance of its stock and feeble EPS growth. Second-quarter net income tumbled 40.8% from a year ago to $8.72 million and EPS dropped 44.1%.
Bronco Drilling's share price is down 15.86% over the past year, in part reflecting the company's sharply declining earnings per share when compared to a year ago. This company has reported somewhat volatile earnings recently and it is to report a decline in earnings in the coming year. Bronco Drilling had been rated a hold since May.
, which makes steel wire reinforcing products, has been downgraded to a hold. While one of the company's primary strengths is its solid financial position, it is also plagued by deteriorating net income, disappointing return on equity and weak operating cash flow. The company recently reported that net income sank 49% to $5.2 million, while sales slipped 10% to $74.4 million. EPS declined by 46.1%.
The company has reported a trend of declining earnings per share over the past year, although the consensus estimate suggests that this trend should reverse in the coming year. Return on equity has greatly decreased from a year ago. Insteel Industries had been rated a buy since October 2005.
Additional ratings changes are listed below.