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.
Chipotle Mexican Grill
, a fast food restaurant operator, has been initiated with a hold rating. While the performance of the company's stock has been solid and its revenue and EPS growth robust, profit margins have been poor. Third-quarter net income increased 75% from a year ago to $20.6 million, or 62 cents a share, while revenue climbed 36% to $286.4 million. Same-store sales, or sales at stores open at least a year, increased 12.4%. Chipotle's gross profit margin is rather low at 23%, but up from a year ago. The net profit margin of 7.20% trails the industry average. Powered by its strong earnings growth and other important driving factors, this company's stock has surged by 104.04% over the past year.
, an investment research firm, has been upgraded to buy. The company holds a largely solid financial position with reasonable debt levels, expanding profit margins, and impressive growth in revenue, earnings per share, and net income. These strengths should outweigh the company's somewhat disappointing return on equity. Third-quarter income climbed 47% from a year ago to $19.9 million, or 41 cents a share. Morningstar, which has no debt to speak of, has demonstrated a pattern of positive EPS growth over the past two years and this trend is expected to continue. Revenue totaled $111.9 million, up from $81.8 million a year ago. Morningstar had been rated hold since February.
, an online jewelry retailer, has been downgraded to hold. While the company has reported growth in EPS, revenue and net income, it has also struggled with weak operating cash flow, poor profit margins and disappointing return on equity. Third-quarter earnings increased 67% over a year ago to $3 million, or 18 cents a share, and revenue climbed 21% to $67.4 million. The company has demonstrated a pattern of positive EPS growth over the past two years and this trend is expected to continue. The company's stock has surged by 108.31% over the past year and the sharp appreciation has driven it to a price level that is now relatively expensive compared to the rest of its industry. Blue Nile had been rated buy since May.
Bois d'Arc Energy
, an oil and natural gas exploration company, has been upgraded to buy. The company maintains a largely solid financial position with reasonable debt levels, expanding profit margins, and growth in net income, EPS, and revenue. Although the company may harbor some minor weaknesses, they are not expected to have a significant impact on results. Driven by strong production growth, third-quarter net income increased 83% from a year ago to $21.2 million, or 32 cents a share, significantly exceeding that of the oil, gas and consumable fuels industry. The company has demonstrated a pattern of positive EPS growth over the past two years and this trend is expected to continue. Bois d'Arc Energy had been rated hold since February.
, a power and data management semiconductors company, has been downgraded to hold. The company maintains a largely solid financial position with reasonable debt levels, a firm stock price performance, and expanding profit margins, but EPS and net income growth have been weak. Third-quarter earnings fell 17% from a year ago to $63.8 million, or 20 cents a share, and revenue slipped about 4% to $402.9 million. The company also projected fourth-quarter sales below expectorations. ON's share price has risen by 58.20% over the past year, but TheStreet.com Ratings does not recommend additional investment in the stock. ON Semiconductor had been rate buy since February.
Additional ratings changes are listed below.