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.
Each of the following ratings updates was generated on Jan. 30.
, a processor of refined sugar, has been upgraded to buy.
The company's strengths include its largely solid financial position, attractive valuation and notable return on equity. These strengths outweigh somewhat weak growth in earnings per share.
Imperial Sugar's debt-to-equity ratio is very low at 0.01 and is below that of the industry average, implying very successful management of debt levels. Furthermore, its quick ratio, at 1.76, demonstrates an ability to cover short-term liquidity needs. Imperial's return on equity exceeds that of the industry average.
The stock is down 25.14%, and it has underperformed the
. In addition, the company's earnings per share are lower today than in the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have brought its value into alignment with its fundamentals. Imperial Sugar had been rated a hold.
, which makes integrated circuits and products used in DVD players, has been upgraded to a buy. The company's strengths can be seen in its revenue growth, largely solid financial position with reasonable debt levels, impressive earnings-per-share growth, compelling growth in net income and attractive valuation levels. These strengths outweigh the stock's lackluster performance.
Zoran's revenue growth of 34.4% is higher than that of the industry average. Zoran has no debt to speak of, a relatively favorable sign. The company also maintains a quick ratio of 4.14, which clearly demonstrates the ability to cover short-term cash needs.
For the fourth quarter of 2007, Zoran posted income of $58.7 million, or $1.11 a share, vs. a loss of $11 million, or 22 cents, in 2006. At 34%, Zoran's year-over-year revenue growth significantly outpaced the industry average. Zoran sports a price-over-earnings (P/E) ratio of 8.50 and a P/E-to-growth ratio (PEG) of 1.46.
, a dry bulk shipper, has been upgraded to hold. The company's strengths include strong revenue growth, solid stock price performance and impressive EPS growth. As a counter to these strengths, the company has not been very careful in the management of its balance sheet.
Quintana's year-over-year revenue growth of 155.8% far exceeded the industry average of 16.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
Powered by its strong earnings growth of 165% among other things, this stock has surged 76.01% over the past year, outperforming the S&P 500. Although the company experienced significant growth over the past year, we do not recommend additional investment in this stock at the current time.
Quintana's return on equity is below that of both the industry average and the S&P 500. The company's gross profit margin is currently very high at 76.30%.
The company's debt-to-equity ratio, at 1.48, is relatively high compared with the industry average, suggesting a need for better debt-level management. Even though the debt-to-equity ratio is weak, Quintana's quick ratio is somewhat strong at 1.04, demonstrating the ability to handle short-term liquidity needs. Quintana Maritime had previously been rated sell.
Ikon Office Solutions
, a document management systems and services company, has been downgraded to hold.
Ikon's cost reduction initiatives to enhance its margins and strengthen its color product portfolio are positives. However, the company's disappointing first-quarter earnings and a weakened debt-to-equity ratio are cause for concern. Ikon also faces intense competition in the document management sector, resulting in heightened pricing pressure.
In the first quarter of 2008, Ikon suffered a year-over-year revenue decrease. Also, any change in the price or deterioration in the company's relationship with its suppliers could adversely affect Ikon.
, a maker of ethanol and distillers grains, has been downgraded to sell as a result of poor profit margins, among other things.
U.S. Bioenergy's current gross profit margin is rather low at 23.3%, and it has decreased significantly from the same period last year. Additionally, the company's net profit margin of 7.4% trails the industry average.The company reported significant year-over-year EPS improvement.
However, for the next year, the market expects earnings to contract to 35 cents a share from 39 cents a share. U.S. Bioenergy's low debt-to-equity ratio of 0.55 is nevertheless higher than the industry average, implying less-than-stellar management of debt levels.
U.S. Bioenergy's return on equity is significantly below that of the industry average and is below that of the S&P 500.
The company's share price has diminished by 32.31% over the past year, which is worse than the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. U.S. Bioenergy had previously been rated hold.
This article was written by a staff member of TheStreet.com Ratings.