The following ratings changes were generated on Monday, Dec. 15.
We've downgraded solid waste services company
Casella Waste Systems
from hold to sell, driven by its unimpressive growth in net income, generally weak debt management and generally disappointing historical performance in the stock itself.
Net income has significantly decreased by 27% since the same quarter a year ago, to $2.1 million,, underperforming the commercial services and supplies industry but outperforming the
. The debt-to-equity ratio is very high at 4.2 and currently higher than the industry average, implying very poor management of debt levels within the company. Casella also maintains a poor quick ratio of 0.7, which illustrates the inability to avoid short-term cash problems. Current return on equity exceeded its ROE from the same quarter one year prior, a clear sign of strength within the company. Casell'as gross profit margin of 35.3% is strong, though it has decreased from the same period last year. The net profit margin of 1.30% trails the industry average.
Shares havv tumbled by 75.3% over the past year, underperfomring the S&P 500. Consistent with the plunge in the stock price, the company's earnings per share are down 46.7% compared with the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor, and 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 newspaper, magazine and Web site publisher
from buy to hold. Strengths include its impressive record of earnings per share growth, compelling growth innet income and revenue growth. However, as a counter to these strengths, we find that we feel that thecompany's cash flow from its operations has been weak overall.
Daily Journal reported significant earnings per share improvement in the most recent quartercompared 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, it increased its bottomline by earning $3.66 vs. $1.68 in the prior year. The net income growth of 89.2% from the same quarter one year ago has significantly exceeded that of the S&P 500 and the media industry. Net operating cash flow has decreased to $1.45 million, or 24.53% when compared with the same quarter last year. In addition, compared with the industry average, the firm's growth rate is much lower.
Shares are off by 29.7% on the year, but the stock's decline was actually not as bad as the broader market plunge during that same time frame. 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.
Nippon Telegraph & Telephone
, which provides fixed andmobile voice related, IP/packet communications, system integration and other telecommunicationsrelated services, from hold to buy, driven by its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and attractive valuation levels. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.
Revenue increased by 0.6% since the same quarter a year ago, boosting EPS significantly in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, Nippon increased its bottom line by earning $2.32 vs. $1.45 in the prior year. This year, the market expects an improvement in earnings to $2.44. Net income growth of 375.4% from the same quarter one year ago has significantly exceeded that of the S&P 500 and the diversified telecommunication services industry.
Shares are not only trading higher than they were a year ago, but the stock has outperformed the rise in the S&P 500 over the same time period. It goes without saying that even the best stocks can fall in an overall down market, but in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
We've downgraded express trust
San Juan Basin Royalty Trust
from buy to hold. Strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including premium valuation and a decline in the stock price during the past year.
Revenue rose by 41.7% since the same quarter a year ago, outpacing the average industry growth of 30.3% and boosting EPS. The company has a debt-to-equity ratio of zero, which we consider to be arelatively favorable sign. It also has a quick ratio of 1.87, which demonstrates the ability of thecompany to cover short-term liquidity needs. San Juan Basin Royalty TRUST has improved earnings per share by 40% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently, but we feel it is poised for EPS growth in the coming year.
Shares are down 23.7% on the year, in part reflecting the market's overall decline. We do not see anything in this company's numbers that would change the one-year trend. Naturally, a bull or bear market could sway the movement of this stock.
We've downgraded food retailer
( WINN) from hold to sell, driven by its decline in the stock price during the past year, feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow.
Winn-Dixie Stores 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. During the past fiscal year, it reported lower earnings of 26 cents vs. $5.67 in the prior year. For the next year, the market isexpecting a contraction of 36.5% in earnings to 17 cents. Net income decreased by 187.3% compared with the same quarter a year ago, underperforming the S&P 500 and the food and staples retailing industry. ROE has greatly decreased, a signal of major weakness. Net operating cash flow has significantly decreased to $15.8 million, or 70.7% when compared with the same quarter last year, but Winn-Dixie is in line with the industry average cash flow growth rate of -75.14%.
Shares are down 13.5% over the past year, due to the market's overall decline and the sharp decline in the company's EPS. Other than the push or pull of the broad market, we do not seeanything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
All ratings changes generated on Dec. 15 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.