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.
The following ratings changes were generated on Thursday, March 26.
Capital City Bank Group
, which operates as the holding company for Capital City Bank, offering commercial and retail banking services in Florida, Georgia and Alabama, from hold to sell. This rating is driven by the company's generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, disappointing return on equity and weak operating cash flow.
Capital City experienced a decline in earnings per share in the most recent quarter compared with the same quarter last year, and we anticipate its two-year trend of declining EPS to continue in the coming year. The company's return on equity also decreased. Net operating cash flow fell to -$3.6 million in the most recent quarter. Net income decreased from $7.7 million to -$1.7 million.
Shares have tumbled by 57.1% over the past year, underperforming the
, but based on its current price in relation to its earnings, Capital City is still more expensive than most of the other companies in its industry.
We've upgraded independent investment banking company
from hold to buy, driven by its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
The 0.1 deb-to-equity ratio is below the industry average, implying successful management of debt levels. The 1.4 quick ratio implies an ability to avoid short-term cash problems. The 40.8% gross profit margin is strong, though it has decreased from the same period last year. Revenue fell 45.6% since the year-ago quarter, and EPS declined in the most recent quarter compared with the year-ago quarter. However, we anticipate that the company's two-year pattern of declining EPS should reverse in the coming year. Net income fell by 56% compared with the year-ago quarter, from $28.5 million to $12. 5 million.
We've downgraded independent clinical laboratory company
Laboratory Corp. of America Holdings
from buy to hold. Strengths include the company's revenue growth, growth in earnings per share and increase in net income. However, we also find weaknesses including weak operating cash flow, a decline in the stock price during the past year and generally poor debt management.
Revenue rose by 12% since the year-ago quarter, compared with the industry average of 6.3% growth. EPS improved by 10.2% compared with the year-ago quarter, and we feel that the company's two-year pattern of positive EPS growth should continue. Its debt-to-equity ratio of 1 is higher than the industry average. Its 1.6 quick ratio is strong, implying the ability to cover short-term cash needs. Net operating cash flow fell 10.4% to $215.3 million compared with the year-ago quarter.
MarkWest Energy Partners
, wich engages in the gathering, compression, treatment, processing and transportation of natural gas, from sell to hold. Strengths include the company's robust revenue growth, compelling growth in net income and expanding profit margins. However, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally poor debt management.
Revenue leaped by 222.6% since the year-ago quarter, and EPS rose. We feel the company is poised for EPS growth in the coming year. Net income increased from -$7.5 million to $186.6 million, outperforming the S&P 500 and the industry average. The debt-to-equity ratio of 0.9 is low overall but higher than the industry average. MarkWest's quick ratio is 0.6. Net operating cash flow fell 30.1% to $52.2 million compared with the year-ago quarter.
, which engages in the design, manufacture, and marketing of equipment for the diagnosis and treatment of sleep-disordered breathing and other respiratory disorders, from buy to hold. Strengths include the company's impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, we find that the stock has had a decline in price during the past year.
EPS improved by 29.4% in the most recent quarter compared with the same quarter last year, and we feel that the company's two-year trend of positive EPS growth should continue. Net income rose 26% compared with the year-ago quarter, from $26.9 million to $33.9 million. ROE also rose, implying strength within the company. ResMed's gross profit margin of 63.3% is lower than it was in the year-ago period. Its net profit margin of 15.2% trails the industry average.
Shares are down 22.5% over the past year, in part reflecting the market's overall decline. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last 12 months, and it could be down again in the next 12. Naturally, a bull or bear market could sway the movement of this stock.
Other ratings changes included
( TWP), downgraded from hold to sell, and
American Bio Medica
, downgraded from hold to sell.
All ratings changes generated on March 26 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.