The following ratings changes were generated on Thursday, March 12.
We've upgraded automotive parts retailer
Advance Auto Parts
from hold to buy, driven by its revenue growth, good cash flow from operations, expanding profit margins, solid stock price performance and notable return on equity. 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 13.7% since the same quarter a year ago, though earnings per share declined by 25.7%. We feel the company is poised for EPS growth in the coming year in spite of reporting somewhat volatile earnings recently. Net operating cash flow increased by 214% to $102.9 million compared with the year-ago quarter, outperforming the industry average. AAP's gross profit margin of 48.2% is strong, though it has decreased from the year-ago period. Its net profit margin of 2% compares favorably with the industry average.
Shares have risen over the past year, outperforming the
, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry, but we feel that other strengths this company displays justify these higher price levels
, which provides financial planning, asset management, and insurance services, 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 fell to -$369 million in the most recent quarter from $255 million in the year-ago quarter, significantly underperforming the S&P 500 and the capital markets industry. Return on equity also greatly decreased, a signal of major weakness within the corporation. EPS declined by 256.5% compared with the year-earlier quarter, though the consensus estimate suggests that the company's two-year trend of declining EPS should reverse in the coming year. Revenue fell by 39.8% since the year-ago quarter.
Shares have tumbled 67.4% over the year, underperforming the S&P 500. The stock's decline 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 provides business and financial management solutions for small and medium-sized businesses, financial institutions, consumers, and accounting professionals, from hold to buy. This rating is driven by the company's largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
EPS Declined by 23.5% in the most recent quarter compared with the year-ago quarter, and revenue fell 5.3%. The low debt-to-equity ratio of 0.5 is still higher than the industry average, but the company's 1.1 quick ratio is sturdy. Intuit's 84.2% gross profit margin is very high, though it has decreased from the same period last year. Its net profit margin of 10.8%, however, is much lower than it was in the same period last year. ROE has slightly decreased from the year-ago quarter, implying a minor weakness.
, which develops and manufactures analog and mixed-signal semiconductors for electronic systems, from hold to sell. This rating is driven by the company's weak operating cash flow, generally weak debt management, decline in the stock price during the past year and feeble growth in its earnings per share.
Net operating cash flow fell 81.6% to $38.2 million compared with the year-ago quarter, underperforming the industry average. Its 5.7 debt-to-equity ratio is above the industry average, implying very poor management of debt levels. Its 2.2 quick ratio, however, is strong, demonstrating its ability to cover short-term cash needs. EPS declined by 67.9% compared with the year-earlier quarter, and we feel it is likely to report a decline in EPS in the coming year. Net income decreased 71% compared with the year-ago quarter, from $72.9 million to $21.1 million.
Shares have plunged 38% over the past year, though the broader market's decline is even worse. 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 classroom-based, print, and online products and services, from hold to sell. This rating is driven by the company's weak operating cash flow and decline in the stock price during the past year.
Net operating cash flow fell 77.2% to $2.1 million compared with the same quarter last year, underperforming the industry average. ROE, however, exceeded that from the year-ago quarter, a clear sign of strength. The company's deb-to-equity ratio of 0.2 is very low and below the industry average, implying very successful management of debt levels. Its quick ratio of 0.9, however, is somewhat weak and could be cause for future problems. EPS improved significantly compared with the same quarter last year, and we feel the company is poised for EPS growth in the coming year.
Shares have plunged 44.1% since the year-ago quarter, apparently dragged down in part by the decline 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.
Other ratings changes included
, downgraded from hold to sell, and
, downgraded from hold to sell.
All ratings changes generated on March 12 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.