Each business day week, 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.
Bois d'Arc Energy
, an oil and gas drilling company, has been upgraded to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, EPS and net income growth, and expanding profit margins.
Although the company may harbor some minor weaknesses, they do not appear likely to have a significant impact on results. Third-quarter profit surged 83% over a year ago to $21.2 million, or 32 cents a share, significantly exceeding 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. Oil and gas sales jumped 31% to $88 million in the quarter. Bois d'Arc Energy had been rated hold since Tuesday.
( FRE), a mortgage financier, has been downgraded to sell. The company's weaknesses can be seen in several areas, such as its feeble EPS growth and generally disappointing historical stock performance. Freddie Mac posted a third-quarter loss of $2 billion, or $3.29 a share, compared with a net loss of $715 million, or $1.17 a share, a year ago. Despite any intermediate fluctuations, there is only bad news to report on this stock's performance over the last year, as it has tumbled by over 50%. The stock's sharp decline last year is a positive for future investors, making it cheaper than most other stocks in its industry. But due to other concerns, TheStreet.com Ratings believes the stock is still not a good buy right now. Freddie Mac had been rated hold since December 2005.
has been upgraded to buy. The company's strengths can be seen in several areas, such as its growth in EPS, net income, and revenue, along with expanding profit margins and good cash flow from operations. Although no company is perfect, there does not seem to be any significant weaknesses which are likely to detract from the generally positive outlook. Third-quarter net profit jumped 67% to $170.6 million. Revenue rose 22.7%. The company has demonstrated a pattern of positive EPS growth over the past two years and this trend should continue. Net operating cash flow has increased to $341.40 million or 14.4% from a year ago. Despite an increase in cash flow, Invesco's average is still marginally south of the industry average growth rate of 16.01%. Invesco had been rated hold since September.
( ARM), an automotive supplier, has been downgraded to sell. The company has struggled with weak debt management, disappointing return on equity, poor profit margins, unsatisfactory historical stock performance and feeble EPS growth. ArvinMeritor posted a fiscal-year fourth-quarter loss of $62 million, or 86 cents a share, compared with a loss of $274 million, or $3.89 a share, a year ago. Revenue was flat at $1.59 billion. The stock has tumbled about 47% over the last year and, while it is cheaper than most other stocks in the industry, TheStreet.Com Ratings does not believe it is a good buy right now. Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. ArvinMeritor had been rated hold since September 2006.
, which owns and operates dry bulk carriers, has been downgraded to hold. While the company has experienced robust revenue growth, notable return on equity and expanding profit margins, it has not been very careful managing its balance sheet. Third-quarter profit totaled $103.5 million, or $2.92 a share, up from $3.5 million, or 11 cents a share, a year ago. This company has reported somewhat volatile earnings recently, but it appears to be poised for EPS growth in the coming year. Voyage revenue came in at $150 million, up from $60 million a year ago. Although this stock has surged over the past year, the hold rating indicates that TheStreet.com Ratings does not recommend additional investment in this stock despite. The debt-to-equity ratio of 1.17 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.50, which clearly demonstrates the inability to cover short-term cash needs. DryShips had been rated buy since November.