Skip to main content

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.

However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.

Washington Mutual

(WM) - Get Waste Management, Inc. Report

, a savings and loan company, has been downgraded to sell. The company's weaknesses can be seen in several areas, such as its feeble EPS growth, disappointing return on equity, poor profit margins and generally disappointing stock performance.

Washington Mutual swung to a fourth-quarter loss of $1.87 billion, or $2.19 a share, compared with earnings of $1.06 billion, or $1.10 a share, a year ago. EPS has declined over the last two years, and this trend is expected to continue in the coming year. Revenue dropped 5% to $3.41 billion. The company said that it has cut 2007 cash bonuses for its top executives.

The stock has tumbled 69.39% over the last year, and in one sense the stock's sharp decline is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But because of other concerns, the stock does not appear to be a good buy right now. Washington Mutual had been rated hold since October.

Gaylord Entertainment

( GET), a hospitality and entertainment company, has been downgraded to sell. The company has struggled with unimpressive growth in net income, weak operating cash flow and generally disappointing stock performance.

Gaylord Entertainment swung to third-quarter loss of $2.2 million, or 5 cents a share, compared with earnings of $6.3 million, or 16 cents a share, a year ago. Net operating cash flow has decreased from a year ago and the firm's growth rate is much lower than the industry average. The stock share price has done poorly compared with where it was a year ago, falling 47.81%.

While the stock's sharp decline is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry, TheStreet.com Ratings feels that because of other concerns, the stock is not a good buy right now. Gaylord Entertainment had been rated hold since October 2006. (The company is scheduled to report fourth-quarter earings Feb. 7.)

TheStreet Recommends

NBTY

( NTY), a nutritional supplement company, has been downgraded to hold. While the company maintains a largely solid financial position with reasonable debt levels by most measures and growth in revenue and net income, it has also contended with a generally disappointing stock performance and weak operating cash flow.

Fourth-quarter net income climbed 29% over a year ago to $48.5 million, or 70 cents a share. Revenue increased 6% to $496.4 million, but trailed the industry average of 17.6%. Current return on equity exceeded the company's ROE from a year ago, a clear sign of strength within the company. NBTY's stock share price is down 49.19% over the past year. Its return on equity also underperformed both the personal products industry and the overall market. Despite the stock's lower price, it does not appear to be a good buy at this time. NBTY had been rated buy since March 2006.

Polaris Industries

(PII) - Get Polaris Inc. Report

, which makes all-terrain vehicles, snowmobiles, and motorcycles, has been downgraded to hold. The company's strengths can be seen in several areas, such as its revenue growth, notable return on equity and good cash flow from operations. However, it has also struggled with deteriorating net income, generally poor debt management and a disappointing stock performance.

The company's third-quarter current return on equity is up sharply over the prior quarter, exceeding the industry average and the overall market. This is a signal of significant strength within the corporation. However, third-quarter net income slipped 8.8% on the year ago to $38.8 million, or $1.09 a share, which is below the leisure equipment and products industry average. Revenue increased to $544 million from $490 million, and Polaris recently affirmed its forecast for 2007 earnings.

This company has reported somewhat volatile earnings recently, but it seems poised for EPS growth in the coming year. Polaris Industries had been rated buy since July. (Polaris is due to report fourth-quarter earnings on Jan. 29.)

Centene

(CNC) - Get Centene Corporation Report

, a multi-line health care company, has been upgraded to buy. The company maintains a largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels, and compelling growth in net income and revenue. These strengths should outweigh the company's weak operating cash flow.

The company swung to a third-quarter profit of $15.9 million, or 36 cents a share, from a loss of $71.19 million a year earlier. Adjusted earnings for the most recent quarter totaled 37 cents a share, compared with 31 cents a year ago. Revenue increased 18.8% to $749.9 million. The company had taken an impairment charge related to its FirstGuard operations. The company's current return on equity greatly increased from a year ago, a signal of significant strength within the corporation. Centene said it will take a $12 million fourth-quarter charge and forecast an increase in 2008 earnings. Centene had been rated hold since July 2006.

Additional ratings chagnes are listed below:

This article was written by a staff member of TheStreet.com Ratings.