Each weekday, TheStreet.com Ratings updates its ratings on the stocks we cover. Our model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our buy, hold or sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
While our 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 forecasted company earnings. Objective elements include volatility of past operating revenue, financial strength and company cash flows.
Some recent rating changes are highlighted below.
Natural gas and oil driller
has been downgraded to a hold from a buy. The company's return on equity fell to just 9.2% in the fourth quarter of fiscal 2006, compared with 29.7% in the same quarter a year ago. TheStreet.com Ratings feels this is a sign of major weakness within the corporation. Atlas American had been rated a buy since June 2006.
has been downgraded to a hold from a buy. The company's revenues declined 15.2% in the fourth quarter of fiscal 2006 compared with the same quarter a year ago. Falling revenues seem to have hurt the bottom line, decreasing earnings per share. Lennar had been rated a buy since March 2005.
Information technology hardware and software provider
has been downgraded to a hold from a buy. The company's earnings per share have declined over the past fiscal year, and return on equity is also down. TheStreet.com Ratings feels these weaknesses are the reason the stock price has fallen 16.5% over the past 12 months. Avocent had been rated a buy since November 2006.
has been upgraded to a hold from a sell. The company produces medical devices used in the treatment of cerebral vascular diseases. Micrus' revenues were up 92.1% in the third quarter of fiscal 2006 compared with the same quarter one year prior. Earnings per share have also improved, and the company has no debt to speak of. TheStreet.com Ratings feels Micrus and its peers in the health care equipment industry have a positive outlook due to the aging of the population. The company had been rated a sell since July 2006.
Outdoor products retailer
has been upgraded to a buy from a hold. The company's earnings per share grew 25% in the fourth quarter of fiscal 2006 compared with the same quarter a year ago. Net income has also been growing significantly faster than the industry average. Cabela's had been rated a hold since March 2006.
Additional ratings changes are listed in the table below.