The following ratings changes were generated on Tuesday, Dec. 16.
American Italian Pasta
( AIPC), which produces and markets dry pasta in North America, to buy, driven by its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.
Revenue rose by 47.2% since the same quarter last year, outpacing the industry average of 35.5% and boosting EPS, which rose by 260% in the most recent quarter. During the past fiscal year, American Italian Pasta increased its bottom line by earning 98 cents vs. 29 cents in the prior year, and this year, the market expects further improvement to $1.62. Net income growth from the same quarter a year ago increased by 293.7%, significantly outperforming the
and the food products industry. Current return on equity exceeded ROE from the same quarter a year ago, a clear sign of strength.
Shares surged by 233.8% over the past year, outperforming the S&P 500. Naturally, any stock can fall in a major bear market, but in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
, the holding company for Branch Banking and Trust, from buy to hold. Strengths include its expanding profit margins, good cash flow from operations and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a decline in the stock price during the past year and feeble growth in the company's earnings per share.
BB&T's gross profit margin of 58.7% is rather high, having increased from the same quarter a year ago, and its net profit margin of 13.8% is above the industry average. Net operating cash flow has slightly increased to -$625 million over the past year. Despite an increase in cash flow of 3.84%, BB&T is still growing at a significantly lower rate than the industry average of 165.66%. Its EPS declined by 18.8% in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, BB&T increased its bottom line by earning $3.15 vs. $2.81 in the prior year. For the next year, the market is expecting a contraction of 16.2% in earnings to $2.64.
Shares are down 18.9%, in part reflecting the market's overall decline. We don't see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry
We've downgraded worldwide offshore oil and gas drilling contractor
Diamond Offshore Drilling
from buy to hold. Strengths its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
Revenue rose by 39.8% since the same quarter a year ago, outperforming the industry average of 26.9% and boosting EPS. DO's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying very successful management of debt levels. The company also maintains a quick ratio of 2.91, which clearly demonstrates the ability to cover short-term cash needs. The net income growth of 51.1% from the same quarter one year ago has significantly exceeded that of the S&P 500 and the energy equipment and services industry
Shares are down by 46.4% on the year, underperforming the S&P 500. Naturally, the overall market trend is bound to be a significant factor, and in one sense, the stock's sharp decline last year 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 due to other concerns, we feel the stock is still not a good buy right now.
, which provides technology and services that help businesses to interact, connect, and relate with their customers, from hold to sell, driven by its generally disappointing historical performance in the stock itself and poor profit margins.
NCR's gross profit margin of 25.3% is lower than desirable, thought it has increased since the same period last year. The company's net profit margin of 5.8% trails the industry average. NCR's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying very successful management of debt levels, but its quick ratio of 0.98 is somewhat weak and could be cause for future problems. Current return on equity exceeded its ROE from the same quarter one year prior, a clear sign ofstrength within the company, but on the basis of ROE, NCR underperformed the industry average.
Shares plunged 44.4% on the year, apparently dragged down in part by the decline we have seen in the S&P 500. In one sense, the stock's sharp decline last year 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 due to other concerns, we feel the stock is still not a good buy right now.
, which designs, develops, manufactures and commercializes a range of intravascular ultrasound and functional measurement products, from hold to sell, driven by an overall disappointing return on equity.
Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior, a signal of major weakness within the corporation. Volcano also reported significant earnings per share improvement in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, it reported poor results of -61 cents vs. -8 in the prior year. This year, the market expects an improvement in earnings to 2 cents. Volcano's gross profit margin is rather high at 66.1%, having increased from the same quarter last year, but its net profit margin of 1.7% significantly trails the industry average. Net operating cash flow has increased by 541.5% to $3.21 million compared with the same quarter last year, and Volcano has vastly surpassed the industry average cash flow growth rate of 21.50%. Net income growth of 214.1% from the same quarter one year ago has significantly exceeded that of the S&P 500 and the health care equipment and supplies industry.
All ratings changes generated on Dec. 16 are listed below.
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.