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 April 30.
, which designs programmable logic solutions, has been upgraded to buy. For the fourth quarter, revenue increased 7.3% year over year to $475.8 million, and earnings per share improved 26% year over year to 36 cents. This year, the market expects an improvement in full-year EPS to $1.47 from $1.27 for 2007. The company's debt-to-equity ratio of 0.60 is higher than that of the industry average, but its company quick ratio of 4.54 is very high and demonstrates very strong liquidity. Return on equity has improved slightly year over year to 22%. Xilinx had been rated hold since Nov. 23.
, the holding company for NBT Bank, has been upgraded to buy. For the first quarter, revenue increased 2.9% year over year to $90.8 million, and earnings per share improved to 43 cents from 41 cents. For 2008, the market expects an improvement in full-year EPS to $1.72 from $1.51 in 2007. Gross profit margin is rather high at 59%. In addition, net profit margin of 15% exceeds the industry average.
Share price is largely unchanged from where it was a year ago. With a price-to-earnings ratio of 14.88, the stock is more expensive than others in its industry. We feel, however, that other strengths justify the premium. NBT Bancorp had been rated hold since Jan. 18.
, which sells accessories and gifts for men and women, has been upgraded to hold. Strengths such as robust revenue growth, a solid financial position and notable return on equity are balanced by a disappointing stock-price performance. For the third quarter of its fiscal 2008, revenue rose 19% year over year to $744.5 million, and earnings per share improved to 46 cents from 39 cents. The company's debt-to-equity ratio is very low at 0.01, implying very successful management of debt. Its quick ratio of 2.10 demonstrates strong liquidity. Gross profit margin is very high at 75%, and net profit margin of 22% significantly outperformed against the industry.
Shares have fallen 30% in the past year. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the stock's decline could make it attractive down the road. Right now, however, we believe that it is too soon to buy. Coach had been rated sell since Feb. 8.
, which designs, manages and markets networking products for home users and small businesses, has been downgraded to hold. Strengths such as revenue growth, a solid financial position and an attractive valuation are countered by deteriorating net income, disappointing return on equity and poor profit margins. For the fourth quarter, revenue rose 14% year over year to $198.2 million, while earnings per share declined to 31 cents from 40 cents.
For 2008, the market expects an improvement in full-year EPS to $1.63 from $1.29 in 2007. Netgear has no debt to speak of, resulting in a debt-to-equity ratio of zero. It also has a quick ratio of 2.19, which demonstrates an ability to cover short-term liquidity needs. With a price-to-earnings ratio of 13.53, the company trades at a discount to its sector peers. Netgear had been rated buy since Aug. 24, 2006.
, which markets performance apparel, footwear and accessories, has been downgraded to sell. For the first quarter, net income decreased 71% year over year to $2.9 million. Return on equity has slightly decreased from the same quarter one year ago to 16%. This implies a minor weakness in the organization.
At 48%, the gross profit margin is strong. The net profit margin of 1.80% trails the industry average. Shares have tumbled 30% in the past year. Despite the decline, the company trades at a premium to its sector peers, with a price-to-earnings ratio of 38.04. Under Armour had been rated hold since Nov. 29.
Additional ratings changes from April 30 are listed below.
This article was written by a staff member of TheStreet.com Ratings.