TSC Ratings' Updates: PepsiAmericas - 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 Wednesday, Aug. 20.

PepsiAmericas

( PAS) was upgraded from hold to buy. PepsiAmericas manufactures, distributes and markets beverage products in the U.S., central and eastern Europe and the Caribbean. The upgrade is driven by multiple strengths in the company such as its growth in earnings per share, compelling growth in net income, revenue growth, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.

PAS has improved earnings per share by 14.3% 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. We feel that this trend should continue. During the past fiscal year, PAS increased its bottom line by earning $1.66 vs. $1.22 in the prior year. This year, the market expects an improvement in earnings ($1.95 vs. $1.66).

The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the

S&P 500

and its profit growth exceeded the beverages industry average. Net income increased by 16.4% when compared with the same quarter one year prior, going from $78 million to $90.8 million.

Despite its growing revenue, the company underperformed as compared with the industry average of 14.0%. Since the same quarter one year prior, revenue rose by 11.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

Net operating cash flow has slightly increased to $95.60 million or 8.63% when compared with the same quarter last year. In addition, PAS has also modestly surpassed the industry average cash flow growth rate of -0.92%.

PAS had been rated a hold since June 30, 2008.

Alkermes

(ALKS) - Get Report

has been upgraded from a hold to a buy. Alkermes, a biotechnology company, develops and manufactures extended-release injectable, pulmonary and oral products for the treatment of prevalent, chronic diseases, such as central nervous system disorders, addiction and diabetes.

The upgrade is driven by several positive factors. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity, reasonable valuation levels, good cash flow from operations andexpanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the biotechnology industry. The net income increased by 239.4% when compared with the same quarter one year prior, rising from $8.75 million to $29.69 million.

The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared with other companies in the biotechnology industry and the overall market, ALKS' return on equity significantly exceeds both the industry average and that of the S&P 500.

Net operating cash flow has significantly increased by 233.90% to $32.36 million when compared with the same quarter last year. In addition, ALKS has also vastly surpassed the industry average cash flow growth rate of -44.65%.

The gross profit margin for ALKS is currently very high, coming in at 78.40%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, ALKS' net profit margin of 54.5% significantly outperformed against the industry.

ALKS had been rated a hold since April 23, 2007.

American Medical Systems Holdings

( AMMD) has been upgraded from a hold to a buy. American Medical Systems Holdings provides medical solutions to physicians treating men's and women's pelvic health conditions worldwide.

The upgrade is driven by many positives. The company's strengths can be seen in multiple areas, such as its impressive record of earnings-per-share growth, compelling growth in net income, revenue growth, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

AMMD reported significant earnings-per-share improvement 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. We feel that this trend should continue. During the past fiscal year, AMMD turned its bottom line around by earning 18 cents vs. -64 cents in the prior year. This year, the market expects an improvement in earnings (66 cents vs. 18 cents).

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the health care equipment and supplies industry. Net income increased by 91.0% when compared with the same quarter one year prior, rising from $7.33 million to $13.99 million.

Despite its growing revenue, the company underperformed as compared with the industry average of 13.4%. Since the same quarter one year prior, revenue rose by 11.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

Net operating cash flow has significantly increased by 660.41% to $39.09 million when compared with the same quarter last year. In addition, AMMD has also vastly surpassed the industry average cash flow growth rate of 80.92%.

The gross profit margin for AMMD is currently very high, coming in at 74.20%. Regardless of AMMD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AMMD's net profit margin of 10.80% is significantly lower than the same period one year prior.

AMMD had been rated a hold since May 1, 2007.

Myriad Genetics

(MYGN) - Get Report

has been upgraded from hold to buy. Myriad Genetics, a biotechnology company, engages in the development and marketing of therapeutic and molecular diagnostic products. The upgrade is driven by positive results.

The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, expanding profit margins and solid stock price performance.

MYGN's very impressive revenue growth greatly exceeded the industry average of 1.4%. Since the same quarter one year prior, revenue leaped by 266.9%. Growth in the company's revenue appears to have helped boost the earnings per share. MYGN has no debt to speak of, and this results in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 6.32, which clearly demonstrates the ability to cover short-term cash needs.

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the biotechnology industry. The net income increased by 939.8% when compared with the same quarter one year prior, rising from -$7.80 million to $65.54 million.

The gross profit margin for MYGN is currently very high, coming in at 94.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 39.30% significantly outperformed against the industry average.

Powered by its strong earnings growth of 877.77% and other important driving factors, this stock has surged by 49.35% over the past year, outperforming the rise in the S&P 500 during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared with the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

MYGN had been rated a hold since Aug. 18, 2006.

Akamai Technologies

(AKAM) - Get Report

has been downgraded from a buy to a hold.Akamai Technologies provides services for accelerating the delivery of content and applications over the Internet. The company offers three business solutions: digital asset solutions, dynamic site solutions and application performance solutions.

The downgrade is driven by many negative factors. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and robust revenue growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

AKAM reported significant earnings-per-share improvement in the most recent quarter compared with the same quarter a year ago. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AKAM increased its bottom line by earning 56 cents a share vs. 34 cents in the prior year. This year, the market expects an improvement in earnings ($1.65 vs. 56 cents).

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet software and services industry. The net income increased by 58.6% when compared with the same quarter one year prior, rising from $21.65 million to $34.33 million.

The gross profit margin for AKAM is currently very high, coming in at 82.60%. Regardless of AKAM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 17.70% trails the industry average.

The return on equity has improved slightly when compared with the same quarter one year prior. This can be construed as a modest strength in the organization. When compared with other companies in the Internet software and services industry and the overall market, AKAM's return on equity is below both the industry average and that of the S&P 500.

AKAM's stock share price has done very poorly compared with where it was a year ago: Despite any rallies, the net result is that it is down by 26.03%, which is also worse that the performance of the S&P 500. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter.

Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, on the basis of its current price in relation to its earnings, AKAM is still more expensive than most of the other companies in its industry.

AKAM had been rated a buy since Nov. 20, 2007.

Additional ratings changes from Aug. 20 are listed below.

Ticker

Company Name

Change

New Rating

Former Rating

AKAM

Akamai Technologies

Downgrade

Hold

Buy

ALKS

Alkermes Inc.

Upgrade

Buy

Hold

AMMD

American Medical Systems

Upgrade

Buy

Hold

ATO

Atmost Energy

Downgrade

Hold

Buy

BHO

B&H Ocean Carriers

Downgrade

Sell

Hold

BIDZ

Bidz.com

Initiated

Hold

CEPH

Cephalon Inc.

Upgrade

Buy

Hold

CWT

California Water Service GP

Upgrade

Buy

Hold

GRIF

Griffin Land & Nurseries Inc.

Downgrade

Hold

Buy

LIMC

Limco-Piedmont Inc.

Initiated

Sell

LPNT

Lifepoint Hospitals Inc.

Upgrade

Buy

Hold

MF

MF Global LTD

Initiated

Sell

MVCO

Meadow Valley Corp

Upgrade

Buy

Hold

MYGN

Myriad Genetics Inc.

Upgrade

Buy

Hold

NXG

Northgate Minerals Corp

Downgrade

Hold

Buy

PAS

PepsiAmericas Inc.

Upgrade

Buy

Hold

PLLL

Parallel Petroleum Corp

Downgrade

Sell

Hold

TG

Tredegar Corp

Upgrade

Buy

Hold

WGNB

WGNB Corp

Downgrade

Sell

Hold

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