The following ratings changes were generated on Monday, March 9.
Alaska Communications Systems Group
, which provides integrated communications services in Alaska, from hold to sell. This rating is driven by the company's deteriorating net income, generally weak debt management, disappointing return on equity, poor profit margins and weak operating cash flow.
Net income decreased to -$18.9 million in the most recent quarter from $120.4 million in the same quarter last year, significantly underperforming the
and the diversified telecommunication services industry. The 44.2 debt-to-equity ratio is very high and above the industry average, implying very poor management of debt levels within the company. The 0.7 quick ratio illustrates the company's inability to avoid short-term cash problems. Return on equity decreased greatly since the same quarter last year, a signal of major weakness within the corporation. The 26.4% gross profit margin is lower than desirable, having decreased from the same quarter last year, and the -19.4% net profit margin is significantly below the industry average. Net operating cash flow decline 3.1% to $26.4 million compared with the year-ago quarter.
, which provides electricity, natural gas and related services, from buy to hold. Strengths include the company's increase in net income, revenue growth and growth in earnings per share. However, we also find weaknesses including poor profit margins and generally poor debt management.
Net income increase by 16.5% compared with the year-ago quarter, from $303 million to $353 million. Revenue rose by 13%, trailing the industry average of 38.6% growth. Earnings per share improved by 15.4%, and we feel the company is poised for EPS growth in the coming year despite reporting somewhat volatile earnings lately. Dominion's 1.7 debt-to-equity ratio is below the industry average, suggesting that this level of debt is acceptable within the multi-utilities industry. The 0.3 quick ratio is very low, demonstrating weak liquidity. Dominion's gross profit margin of 25.5% is lower than desirable, having decreased from the same quarter the previous year. The 8.5% net profit margin, however, is above the industry average.
We've downgraded athletic footwear company
( KSWS) from hold to sell, driven by its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and poor profit margins.
The company experienced a steep decline in EPS in the most recent quarter compared with the same quarter last year, and we anticipate that the company's two-year trend of declining EPS should continue in the coming year. Net income fell from $600,000 in the year-ago quarter to -$13.7 million, significantly underperforming the S&P 500 and the textiles, apparel and luxury goods industry. ROE slightly decreased, implying a minor weakness in the organization. K-Swiss' 22.3% gross profit margin is rather low, having decreased significantly from the year-ago period. The -24.4% net profit margin is significantly below the industry average.
Shares are down 50.9% over the past year, in part reflecting the overall decline in the broad market. Despite the heavy decline in its share price, however, this stock is still more expensive (when compared with its current earnings) than most other companies in its industry.
, which engages principallyin the research, design, development, manufacture, integration, and sustainment of advanced technology systems, products and services, from buy to hold. Strengths include the company's revenue growth, notable return on equity and increase in net income. However, we also find weaknesses including generally poor debt management, a decline in the stock price during the past year and poor profit margins.
Revenue increased by 2.7% since the year-ago quarter, helping to boost EPS. ROE greatly increased, a signal of significant strength. Lockheed's debt-to-equity ratio of 1.3 is high relative to the industry average, suggesting a need for better debt-level management, and the company's poor quick ratio of 0.7 illustrates its inability to avoid short-term cash problems.
Shares have plunged by 43.5% over the year, in part dragged down 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.
We've downgraded crude oil refining and marketing company
from hold to sell, driven by its deteriorating net income, disappointing return on equity, weak operating cash flow, poor profit margins and generally weak debt management.
Net income fell significantly, from $567 million in the year-ago quarter to -$3.3 billion in the most recent quarter, significantly underperforming the S&P 500 and the oil, gas and consumable fuels industry. ROE also greatly decreased, a signal of major weakness. Net operating cash flow decreased to $485 million, underperforming the industry average. Valero's 10.1% gross profit margin is extremely low, though it has increased from the year-ago period. The -17.9% net profit margin significantly underperformed the industry average. Though low, the 0.4 debt-to-equity ratio is above the industry average. The 0.7 quick ratio is low, demonstrating weak liquidity.
Other ratings changes included
, downgraded from buy to hold, and
, downgraded from buy to hold.
All ratings changes generated on March 9 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.