TSC Rating's Updates: Pan American Silver - TheStreet

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.

The following ratings changes were generated on Monday, July 14.

Pan American Silver

(PAAS) - Get Report

engages in the exploration, acquisition, development and operation of silver properties. The company also focuses on copper, zinc, lead and gold minerals. PAAS has been upgraded to buy.

PAAS' very impressive revenue growth greatly exceeded the industry average of 36%. Since the same quarter one year prior, revenue leaped by 126%. Along with this, the company maintains a quick ratio of 3.84, which clearly demonstrates the ability to cover short-term cash needs.

PAAS has improved earnings per share by 46% in the most recent quarter compared with the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, PAAS increased its bottom line by earning $1.12 vs. 74 cents in the prior year.

The net income increased by 48% when compared with the same quarter one year prior, rising from $20.44 million to $30.16 million. The gross profit margin for PAAS is rather high; currently it is at 53%. It has increased significantly from the same period last year. Along with this, the net profit margin of 28% is above the industry average. PAAS has been rated a hold since June 2008.

Aetna

(AET)

operates as a diversified health care benefits company primarily in the U.S. and Canada; it has been downgraded to hold.

The revenue growth came in higher than the industry average of 4%. Since the same quarter one year prior, revenue rose by 16%. Despite any rallies, the net result is that it is down by 29%, which is also worse that the performance of the

S&P 500

index. So far, investors have failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter.

Naturally, the overall market trend is bound to be a significant factor. However, 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.

Because of other concerns, we feel the stock is still not a good buy right now. The gross profit margin for AET is currently lower than what is desirable, coming in at 28%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 5.6% is above the industry average. AET has been rated a buy since July 2006.

Best Buy

(BBY) - Get Report

together with its subsidiaries, operates as a specialty retailer of consumer electronics, home office products, entertainment software, appliances and related services primarily in the U.S., Canada and China. BBY has been downgraded to hold.

The revenue growth came in higher than the industry average of 4.7%. Since the same quarter one year prior, revenue rose by 13%. BBY has improved earnings per share by 10% in the most-recent quarter compared with the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year.

During the past fiscal year, BBY increased its bottom line by earning $3.18 versus $2.80 in the prior year. This year, the market expects an improvement in earnings ($3.30 vs. $3.18).

BBY is off 21% from its price level of one year ago, reflecting the general market trend and ignoring their higher earnings per share compared with the year-earlier quarter. 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. BBY has been rated a buy since July 2006.

Lehman Brothers

(LEH)

, through its subsidiaries, provides various financial services to corporations, governments and municipalities, institutions and high-net-worth individuals worldwide. LEH has been downgraded to sell.

The net income has significantly decreased by 318% when compared with the same quarter one year ago, falling from $1,273 million to negative $2,774 million. The debt-to-equity ratio is very high at 17.41 and currently higher than the industry average, implying that there is very poor management of debt levels within the company.

Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 83%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 333% compared with the year-earlier quarter.

Because of concerns, we feel the stock is still not a good buy right now. LEH has experienced a steep decline in earnings per share in the most recent quarter in comparison with its performance from the same quarter a year ago. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, LEH increased its bottom line by earning $7.25 vs. $6.73 in the prior year. For the next year, the market is expecting a contraction of 143% in earnings (-$3.15 vs $7.25). LEH has been rated a hold since March 2008.

Discover Financial Services

(DFS) - Get Report

operates as a credit card issuer and electronic payment services company primarily in the U.S. It operates in two segments: U.S. Card and Third-Party Payments. DFS has been initiated at a sell.

Looking at the price performance of DFS' shares over the past 12 months, there is not much good news to report: The stock is down 52%, and it has underperformed the S&P 500 Index. In addition, the company's earnings per share are lower today than in the year-earlier quarter.

The gross profit margin for DFS is currently lower than what is desirable, coming in at 29%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 16% is above that of the industry average. DFS' earnings per share declined by 19% in the most recent quarter compared with the same quarter a year ago. This year, the market expects an improvement in earnings ($1.55 vs. 82 cents).

In comparison to the other companies in the consumer finance industry and the overall market, DFS' return on equity is significantly below the industry average and is below that of the S&P 500. Net operating cash flow has improved to $744.63 million from having none in the same quarter last year. DFS has not previously been rated.

Additional ratings changes are listed below.

Ticker

Company Name

Change

New Rating

Former Rating

AEG

Aegon

Downgrade

Hold

Buy

AET

Aetna

Downgrade

Hold

Buy

ASH

Aahland

Downgrade

Hold

Buy

ASX

Advanced Semicon Engineering

Downgrade

Hold

Buy

BBY

Best Buy

Downgrade

Hold

Buy

BOFL

Bank of Florida

Downgrade

Sell

Hold

CBG

CB Richard Ellis Group

Downgrade

Hold

Buy

CFSG

China Fire & Security

Downgrade

Sell

Hold

CHRN

China Huaren Organic Products

Downgrade

Sell

Hold

CIG.C

CIA Energetica de Minas

Initiated

Hold

CTR

Cato

Upgrade

Buy

Hold

CVG

Convergys

Downgrade

Hold

Buy

DFS

Discover Financial Services

Initiated

Sell

DGNG

Diguang International Development

Downgrade

Sell

Hold

EBF

Ennis

Downgrade

Hold

Buy

GRAN

Bank of Granite

Downgrade

Sell

Hold

HALL

Hallmark Financial Services

Downgrade

Hold

Buy

HEW

Hewitt Associates

Downgrade

Hold

Buy

HTC

Hungarian Telephone & Cable

Upgrade

Hold

Sell

IAX

International Absorbents

Downgrade

Hold

Buy

KELYA

Kelly Services

Downgrade

Hold

Buy

KPPC

Kapstone Paper & Packaging

Upgrade

Buy

Hold

LEH

Lehman Brothers

Downgrade

Sell

Hold

MGIC

Magic Software Enterprises

Downgrade

Sell

Hold

MOVE

Move

Downgrade

Sell

Hold

MRN

Medical Staffing Network

Downgrade

Sell

Hold

NBTF

NB & T Financial Group

Upgrade

Hold

Sell

NFS

Nationwide Financial

Downgrade

Hold

Buy

OPY

Oppenheimer Holdings

Downgrade

Hold

Buy

PAAS

Pan America Silver

Upgrade

Buy

Hold

PFBI

Premier Financial Bancorp

Downgrade

Hold

Buy

PRSP

Prosperity Bancshares

Downgrade

Hold

Buy

QDHC

Quadramed

Upgrade

Buy

Hold

RATE

Bankrate

Downgrade

Hold

Buy

RDI.B

Reading International

Downgrade

Sell

Hold

REG

Regency Centers

Downgrade

Hold

Buy

SCRX

Sciele Pharmaceuticals

Downgrade

Hold

Buy

STX

Seagate Technology

Downgrade

Hold

Buy

TAXI

Medallion Financial

Upgrade

Hold

Sell

TFCO

Tufco Tech

Downgrade

Hold

Buy

TRH

Transatlantic Holdings

Downgrade

Hold

Buy

VALU

Value Line

Downgrade

Hold

Buy

WIT

Wipro

Downgrade

Hold

Buy

This article was written by a staff member of TheStreet.com Ratings.