Each business day, 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.
, which makes greeting cards, party goods and other items, has been downgraded to hold. While the company's growth in net income has been compelling, its revenue is rising and it is reasonably valued, return on equity has been disappointing.
American Greetings swung to a fiscal-year second-quarter profit of $8.4 million, or 15 cents a share, from a loss of $10.5 million, or 18 cents a share, a year ago. Revenue increased about 2.3% to $377.4 million, short of the industry average of 3.7%. The company also backed its prior guidance for fiscal 2008 earnings of $1.35 to $1.55 a share. Even though American Greetings' stock has risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock. American Greetings had been rated buy since June.
, the world's largest uranium producer, has been downgraded to hold. Although the company has seen growth in revenue, EPS and net income, it is also struggling with a disappointing stock performance and unsatisfactory return on equity, yet it is trading at a premium valuation.
Third-quarter profit climbed 25% from a year ago to about $89 million because of higher earnings in the uranium business driven by significant increases in the realized selling price and higher deliveries. Revenue rose 89% to about $666 million. In its most recent trading session, Cameco closed at a price level that was not very different from its closing price a year ago. Looking ahead, there seems to be nothing in this company's numbers that would change the one-year trend. Cameco had been rated buy since December 2005.
( OPTM), which makes optical switching and transmission equipment, has been initiated with a sell rating. The company's weaknesses can be seen in several areas, such as its generally disappointing historical stock performance, feeble growth in EPS and net income, poor profit margins and weak operating cash flow.
Optium swung to a fiscal-year first-quarter loss of $1.1 million, or 4 cents a share, compared with earnings of $2.8 million, or 13 cents a share, a year ago. Revenue increased 20.4% to $36.1 million. The company has significantly underperformed when compared with the broader communications equipment industry. The stock price has tumbled nearly 52% over the last 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.
( DIET), which develops Internet-based diet and fitness programs, has been upgraded to hold. The company maintains a largely solid financial position with reasonable debt levels by most measures and expanding profit margins and a solid stock price performance. However, eDiets.com has also struggled with feeble EPS growth, deteriorating net income and disappointing return on equity.
The company swung to a third-quarter loss of $2.5 million, or 10 cents a share, compared with a profit of $465,000, or 2 cents a share, a year ago. Revenue totaled $6.8 million, down from $12.2 million. EPS has declined over the last year, and this is expected to continue in the coming year. eDiets.com's share price has jumped by about 34.54%, exceeding the performance of the broader market during that same period. Nevertheles, TheStreet.com Ratings does not recommend additional investment in this stock. eDiets.com had been rated sell since August 2006.
, a drilling contractor, has been downgraded to hold. While the company maintains a largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins, it has also struggled with deteriorating net income, weak operating cash flow and disappointing return on equity.
Third-quarter profit fell 47% from a year ago to $98.2 million, or 62 cents a share, largely due to a drop in drilling revenue. Net operating cash flow decreased to $197.61 million or 24.36% from a year ago and the firm's growth rate is much lower than the industry average. Revenue slipped 22% to $524 million. Patterson-UTI Energy had been rated buy since December 2005.
Additional ratings changes are listed below.