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Stock Upgrades, Downgrades From TheStreet.com Ratings

Suburban Propane upgraded; Discovery Holding, NII Holdings, Eagle Materials, Felcor Lodging Trust downgraded.

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.

The following ratings changes were made on Feb. 11.

Suburban Propane

(SPH) - Get Suburban Propane Partners, L.P. Report

, a distributor of propane and other fuels, has been upgraded to buy. The company's strengths include strong revenue growth, solid stock price performance and notable return on equity. These strengths outweigh weak operating cash flow.

On Feb. 7, Suburban Propane reported first-quarter earnings of $85.4 million, or $1.27 a share, vs. $54.7 million, or $1.64, a year ago. Growth in net income significantly exceeded that of the

S&P 500

and the gas utilities industry.

The company's share price has not changed very much over the past year due in part to the relatively weak year-over-year performance of the overall market and the company's stagnant earnings. For the future, this stock has good upside potential.

The company's return on equity has greatly decreased year over year, but still exceeds the industry average. Suburban Propane had been rated hold since Nov. 26.

Discovery Holding

(DISCB) - Get Discovery, Inc. Class B Report

, which provides creative and network services to the media and entertainment industries, has been downgraded to hold. The company's strengths include encouraging revenue growth, a solid financial position and compelling net-income expansion. Weaknesses include poor profit margins and weak operating cash flow.

With no debt to speak of, Discovery Holding has a debt-to-equity ratio of zero, a relatively favorable sign. The company maintains a quick ratio of 2.74, which demonstrates the ability to cover short-term cash needs.

On the other hand, at 31%, Discovery Holding's gross profit margin is lower than desirable. The company's net profit margin of 4.2% also trails the industry average. In addition, net operating cash flow has decreased to a loss of $2.87 million year over year. With a price-to-earnings ratio of 65.26, the stock is much more expensive than the industry average. Discovery Holding had been rated buy since July 23.

NII Holdings

TheStreet Recommends

(NIHD) - Get NII Holdings Inc Report

, a digital wireless communication services firm, has been downgraded to hold. The company's strengths include robust revenue growth, impressive EPS growth and reasonable valuation levels. Weaknesses include a disappointing stock performance and poor debt management.

For the third quarter of 2007, strong revenue growth helped boost EPS 21% to 46 cents year over year. The company's trend of EPS growth should continue.

The gross profit margin for NII Holdings is rather high at 61% and has increased from the year-ago quarter. However, the company's net profit margin of 9.60% significantly trails the industry average.

NII's debt-to-equity ratio of 1.18 is higher than the industry average. With a quick ratio of 2.97, however, the company can cover short-term cash needs. The stock itself has fallen 45% over the past year. Despite the decline, it is still more expensive than most other stocks in its industry. NII Holdings had been rated buy since TheStreet.com Ratings initiated coverage on Feb. 8, 2006.

Eagle Materials

(EXP) - Get Eagle Materials Inc. Report

, a maker of building materals, has been downgraded to hold. The company's strengths include its financial position and notable return on equity. Weaknesses include deteriorating net income, premium valuation and weak operating cash flow.

In the third quarter of 2007, Eagle Materials posted a profit of $22.4 million, or 50 cents a share, vs. $40.9 million, or 83 cents a share, a year ago. This change in income lags both the S&P 500 and the construction materials industry.

Eagle Materials' debt-to-equity ratio of 0.92 is somewhat low overall but exceeds the industry average. However, the company's quick ratio of 1.14 is sturdy.

Return on equity has decreased year over year, but exceeds the industry average. At 12.67, the company's price-over-earnings ratio exceeds the industry average of 9.44. Eagle Materials had been rated buy since TheStreet.com Ratings initiated coverage on Feb. 8, 2006.

Felcor Lodging Trust

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, a real estate investment trust whose holdings include Embassy Suites, Crowne Plaza, Holiday Inn, Sheraton and Doubletree, has been downgraded to sell. Disappointing stock performance, unimpressive growth in net income and poor profit margins all contribute to the ratings change.

The stock has fallen by 44.78% over the past year. Despite the heavy decline in price, this stock is still expensive. It has a price-to-earnings ratio of 163.75, vs. an industry average of 80.39.

Felcor's gross profit margin is extremely low at 12% and has decreased over the past year. In addition, net profit margin of 3% trails the industry average. Return on equity has improved slightly over the same period, but at 0.45%, underperformed the industry average. Felcor Lodging Trust had been rated hold since May 26, 2006.

Additional ratings changes from Feb. 11 are listed below.

Ticker

Company Name

Change

New Rating

Former Rating

CMO

CAPSTEAD MORTGAGE CORP

Upgrade

Hold

Sell

EXP

EAGLE MATERIALS INC

Downgrade

Hold

Buy

CENT

CENTRAL GARDEN & PET CO

Downgrade

Sell

Hold

ECGI

ENVOY CAPITAL GROUP INC

Upgrade

Buy

Hold

FCH

FELCOR LODGING TR INC

Downgrade

Sell

Hold

GIGA

GIGA-TRONICS INC

Downgrade

Sell

Hold

HIFN

HI/FN INC

Downgrade

Sell

Hold

INPH

INTERPHASE CORP

Downgrade

Sell

Hold

PTC

PAR TECHNOLOGY CORP

Downgrade

Sell

Hold

RFIL

R F INDUSTRIES LTD

Downgrade

Hold

Buy

RBPAA

ROYAL BANCSHARES/PA

Downgrade

Sell

Hold

SGP

SCHERING-PLOUGH

Downgrade

Hold

Buy

SPH

SUBURBAN PROPANE PRTNRS -LP

Upgrade

Buy

Hold

TOD

TODD SHIPYARDS CORP

Upgrade

Buy

Hold

TRY

TRIARC COS INC

Downgrade

Sell

Hold

TSRI

TSR INC

Downgrade

Hold

Buy

CNC

CENTENE CORP

Downgrade

Hold

Buy

NIHD

NII HOLDINGS INC

Downgrade

Hold

Buy

TRY.B

TRIARC COS INC

Downgrade

Sell

Hold

SNX

SYNNEX CORP

Upgrade

Buy

Hold

DISCB

DISCOVERY HOLDING CO

Downgrade

Hold

Buy

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