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 Tuesday, June 9.
Coca-Cola Bottling Co. Consolidated
from hold to buy, driven by its compelling growth in net income, notable return on equity, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.
Net income increased to $8.53 from -$4.3 million in the same quarter a year ago, outperforming the
and the beverages industry. Return on equity also greatly increased, a signal of significant strength within the corporation. Net operating cash flow rose 110.6% to $1.7 million, and the gross profit margin of 48.3% also increased compared with the year-ago quarter. The net profit margin of 2.5%, however, trails the industry average.
Shares have risen over the past year, outperforming the S&P 500. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
First Mercury Financial
( FMR) from sell to hold. Strengths include the company's robust revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, we also find weaknesses including poor profit margins and weak operating cash flow.
Revenue rose by 29% since the year-ago quarter, and EPS improved. We feel the company is poised for EPS growth in the coming year. First Mercury's debt-to-equity ratio of 0.2 is below the industry average, implying very successful management of debt levels. The 22.3% gross profit margin, however, is rather low, having decreased from the same quarter last year. Net operating cash flow declined marginally to $26.1 million.
from hold to buy, driven by its attractive valuation levels, considering its current price compared to earnings, book value and other measures. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
Revenue fell by 45.3% since the same quarter a year prior, and EPS decreased. Net income fell by 61.4% to $282 million but significantly outperformed the S&P 500 and the oil, gas and consumable fuels industry average. Marathon's gross profit margin of 16.3% is rather low, though it has increased from the year-ago period. The net profit margin of 3.1% trails the industry average. Net operating cash flow fell 32.5% to $555 million compared with the year-ago quarter but exceeded the industry average cash flow growth rate of -43.2%.
from buy to hold. Strengths include the company's robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, we find that we feel that the company's cash flow from its operations has been weak overall.
Revenue rose by 30.2% since the same quarter last year, and EPS improved by 30.8%. However, we anticipate underperformance in the coming year relative to the company's yearlong pattern of positive EPS growth. Starent has no debt to speak of and a quick ratio or 2.3, which demonstrates its ability to cover short-term liquidity needs. Net operating cash flow fell 59.2% to $23.3 million compared with the same quarter last year.
from hold to buy, driven by its increase in net income, growth in earnings per share, notable return on equity and relatively strong performance when compared with the S&P 500 during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
Net income increased by 13.8% since the year-ago quarter, from $64 million to $72.8 million. EPS improved by 7.1%, and we feel the company is poised for EPS growth in the coming year. Revenue fell by 11.9% compared with the year-ago quarter. ROE slightly decreased but exceeds that of the industry average and the S&P 500.
Shares are down 23.1% over the past year, in part reflecting the market's overall decline. The fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
All ratings changes from June 9 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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