TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

The following ratings changes were generated on Friday, June 12.

We've upgraded

Compellent Technologies

( CML) from sell to hold. Strengths include the company's robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Revenue leaped by 53.3% since the same quarter last year, and EPS improved. Compellent has no debt to speak of and maintains a quick ratio of 3.5, demonstrating its ability to cover short-term cash needs. The 54.6% gross profit margin has increased from the year-ago quarter, though the net profit margin of 3.6% trails the industry average. On the basis of return on equity, Compellent underperforms both the industry average and the

S&P 500

.

Shares have risen over the past year, outperforming the S&P 500 over the same time period. Although other factors naturally played a role, the company's strong earnings growth was key. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.

We've upgraded

Coach

(COH)

from sell to hold. Strengths include the company's largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. 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.

Coach's debt-to-equity ratio of 0.02 is below the industry average, and its quick ratio of 1.6 demonstrates its ability to cover short-term liquidity needs. Net operating cash flor increased 142.3% to $206.9 million compared with the same quarter last year. The 75.1% gross profit margin is high, though it has decreased from the prior-year quarter. The 15.5% net profit margin compared favorably with the industry average. EPS declined by 21.7% in the most recent quarter compared with the same quarter last year, and we feel the company is likely to report a decline in earnings in the coming year.

Shares are down 18.8% over the past year, in part reflecting the market's overall decline. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

We've upgraded

Forrester Research

(FORR) - Get Report

from hold to buy, driven by its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Revenue rose by 2.6% since the year-ago quarter, outperforming the industry average growth rate of 1.9%. EPS, however, declined. Forrester has no debt to speak of and maintains a quick ratio of 2, demonstrating its ability to cover short-term liquidity needs. ROE has improved slightly compared with the year-ago quarter. The 60.6% gross profit is high, though it has decreased from the same period last year. The 4.7% net profit margin is significantly lower than it was in the year-ago quarter.

We've upgraded

Pengrowth Energy Trust

(PGH)

from sell to hold. Strengths include the company's increase in net income, reasonable valuation levels and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally poor debt management.

Net income increased from -$56.6 million in the year-ago quarter to $54.2 million in the most-recent quarter, exceeding the growth in the S&P 500 and the oil, gas and consumable fuels industry. ROE has improved slightly, but net operating cash flow fell 56.4% to $94.4 million.

Shares are down 56.9% since the year-ago quarter, underperforming the S&P 500. Naturally, the overall market trend is bound to be a significant factor. However, 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.

We've upgraded

Smith Micro Software

(SMSI) - Get Report

from sell to hold. Strengths include the company's revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Revenue rose by 8.7% since the year-ago quarter, and EPS improved significantly. We feel the company is poised for EPS growth in the coming year. Smith Micro has no debt to speqk of and a quick ratio of 5, demonstrating its ability to cover short-term cash needs. The 86.8% gross profit margin is very high, having increased from the same quarter last year, but the net profit margin of 1.2% trails the industry average. ROE has decreased slightly from the year-ago quarter.

All ratings changes from June 12 are listed below.

Note: Our quantitative model makes stock recommendations based on GAAP figures that may differ materially from data as reported by the companies themselves. As a result, rating changes are occasionally driven by so-called nonrecurring items. As always, we urge readers to use TSC Ratings' reports in conjunction with additional information to construct their opinions on the value that should be placed on any given stock.

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