The following ratings changes were generated on Friday, Jan. 23.
, which designs, develops and produces unmanned aircraft systems and efficient energy systems, from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
Revenue rose by 22.5% since the same quarter last year, and earnings per share rose significantly. The company has demonstrated a pattern of positive EPS growth over the past year, and we feel that this trend should continue. Net income increased by 75.4% compared with the same quarter last year, rising from $5.2 million to $9.1 million. AeroVironment has no debt to speak of and maintains a quick ratio of 6.6, which clearly demonstrates the ability to cover short-term cash needs. Its 39.7% gross profit margin is strong, having increased from the year-ago quarter, and its 13.8% net profit margin is above the industry average.
Capital One Financial
from hold to sell, driven by its generally disappointing historical performance in the stock itself, deteriorating net income, disappointing return on equity and feeble growth in its earnings per share.
Net income decreased by 727.4% compared with the year-ago quarter, and return on equity also greatly decreased. Revenue fell by 17.8%, and EPS declined by 531.8%. The company has reported a trend of declining earnings per share over the past two years, but the consensus estimate suggests that this trend should reverse in the coming year. Shares are down 44.9% on the year, underperforming the
, but the stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
, which engages in the acquisition, development, production and exploration of oil and natural gas properties, from hold to buy, driven by its robust revenue growth, expanding profit margins, good cash flow from operations, compelling growth in net income and solid stock price performance. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.
Revenue rose by 42.9% since the year-ago quarter, and net operating cash flow increased by 57.6%. Net income rose 1,040%, and EPS also rose. Petrohawk's gross profit margin of 87.2%, an increase over the same quarter last year, is very high, and its net profit margin of 100.2% significantly outperformed the industry average. Shares are up on the year, outperforming the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels
from hold to sell, driven by its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
Net income has increased by 876.2% compared with the same quarter last year, and ROE and EPS have also greatly decreased. The company has reported a trend of declining earnings per share over the past two years, but the consensus estimate suggests that this trend should reverse in the coming year. Revenue fell by 19%, compared with the industry average decline of 11.5%. Shares are down 59% on the year, underperforming the S&P 500. The fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
, which distributes air conditioning, heating andrefrigeration equipment, from hold to sell, driven by its feeble growth in its earnings per share, deteriorating net income, weak operating cash flow, disappointing return on equity and poor profit margins.
EPS declined by 7/7% in the most recent quarter compared with the same quarter last year. Earnings per share have declined over the last two years, a trend we anticipate should continue in the coming year. Net income decreased by 7.6% compared with the same quarter last year, dropping from $25.3 million to $23.3 million, Net operating cash flow fell 195.1% to -$9.9 million. ROE is down slightly. Watsco's 27% gross profit margin is lower than what is desirable, though it has managed to increase from the same period last year. Its net profit margin of 4.9% trails the industry average.
Other ratings changes include
, downgraded from buy to hold, and
, downgraded from hold to sell.
All ratings changes generated on Jan. 23 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.