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.
, a data service provider, has been initiated with a hold rating. While the company holds a largely solid financial position, with reasonable debt levels, solid stock price performance, and robust revenue growth, return on equity has been disappointing. The company swung to a third-quarter profit, earning $2.8 million, or 4 cents a share, compared with a loss of $3.1 million, or, 16 cents a share, a year ago. Revenue rose 157% to $63.3 million. The stock climbed nearly 120% over the last year, but shares were off Wednesday, as analysts said the company's fourth-quarter forecast was not strong enough. TheStreet.com Ratings believes Riverbed's fundamentals should not have much impact in either direction, allowing the stock to move up or down based on the push and pull of the broad market.
People's United Financial
, a financial services company, has been upgraded to buy. The company has enjoyed expanding profit margins and impressive growth in revenue, EPS and net income. These factors are expected to outweigh the stock's lackluster performance. People's United reported a boost in third-quarter profit, earning $57.6 million, or 20 cents a share, up from $17 million, or 6 cents a share, a year ago. The company has reported volatile earnings recently, but TheStreet.Com Ratings believes it is poised for EPS growth in the coming year. The stock price has declined 8.47% from its price level of one year ago, but it is still more expensive than most other companies in its industry. However, the company's other strengths should compensate for this. People's United Financial had been rated hold since July.
Cathay General Bancorp
, a financial services company, has been downgraded to hold. The company has seen notable return on equity with growth in revenue and EPS, but the stock has had a generally disappointing performance in the past year. In July, the company said second-quarter profit increased 5.3% from a year ago to $30.6 million, while EPS increased 7.1% to 60 cents a share. The company has demonstrated a pattern of positive EPS growth over the past two years and this trend is expected to continue. Cathay General's stock price has declined 20.4% from its price level of one year ago and there appears to be nothing in this company's numbers that would change the one-year trend. Cathay General Bancorp had been rated buy since October 2005.
, a home loan insurer, has been downgraded to sell. The company's weaknesses can be seen in several areas, including its feeble EPS growth, deteriorating net income, unsatisfactory return on equity and generally disappointing historical stock performance. The company recently reported a third-quarter loss of $372.5 million, or $4.60 a share, compared with a profit of $130 million, or $1.55 a share, a year ago. EPS have declined over the last year and this is expected to continue in the coming year. This company stock has tumbled 64.23% over the last year and the sharp decline may be a positive for future investors. But due to other concerns, the stock is not a good buy right now. MGIC Investment had been rated hold since July.
, which operates a chain of drive-in restaurants, has been upgraded to buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue and EPS growth and expanding profit margins. These factors are expected to outweigh the company's sub par growth in net income. The company recently said fiscal year fourth-quarter net income slipped to $22 million, or 34 cents a share, down from $25.5 million, or 29 cents a share, a year ago, due to higher interest expense. Revenue increased 13% to $224.3 million. The company has demonstrated a pattern of EPS growth over the past two years and this trend is expected to continue. Sonic had been rated hold since January.
Additional ratings changes are listed below.