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, May 28.

Affiliated Computer Services

( ACS), which provides business process outsourcing and information technology services, has been upgraded to buy. For the third quarter of fiscal 2008, revenue improved 7.3% year over year to $1.54 billion, and earnings per share rose to 85 cents from 82 cents.

This year, the market expects an improvement full-year EPS to $3.51 from $2.50. Net operating cash flow has more than doubled to $229.5 million from the year-ago quarter. In addition, Affiliated Computer Services has also vastly surpassed the industry average cash flow growth rate. The debt-to-equity ratio is 1.12 but is still below the industry average. The company's quick ratio of 1.64 is high and demonstrates strong liquidity. Affiliated Computer Services had been rated hold since May 25, 2007.

Alliance Data Systems

(ADS) - Get Report

, which provides transaction, marketing and credit services, has been upgraded to buy. For the first quarter, revenue declined 9.1% year over year to $499.3 million, while earnings per share rose to 78 cents from 70 cents.

For 2008, the market expects an improvement in full-year EPS to $4.30 from $2.03 in 2007. Return on equity has slightly decreased from the same quarter one year prior and trails the industry average. This implies a minor weakness in the organization. Gross profit margin is rather low at 24%, and the net profit margin of 9.90% trails the industry average. Alliance Data Systems had been rated hold since May 25, 2007.

Choicepoint

(CPS) - Get Report

, a provider of identification and credential verification services, has been upgraded to buy. For the first quarter, revenue grew 4.9% year over year to $256.5 million, and earnings per share improved by a penny to 39 cents.

For 2008, the market expects an improvement in full-year EPS to $1.80 from 77 cents in 2007. Net operating cash flow has increased 30% to $51.29 million. Return on equity has improved to 16% from the year-ago quarter but trails the industry average. Shares have risen faster than the

S&P 500

in the past year, netting the stock a price-to-earnings ratio of 62.22. At this valuation, the stock trades at a substantial premium to its peers. Choicepoint had been rated hold since Feb. 27.

Sallie Mae

(SLM) - Get Report

, a provider of education finance, has been downgraded to sell. For the first quarter, revenue declined 21% year over year to $2.24 billion, and earnings per share swung to a loss of 28 cents from a profit of 26 cents. For 2008, the market expects an improvement in full-year EPS to a profit of $1.57 from a loss of $3.54.

The debt-to-equity ratio is very high at 28.91 and is currently higher than the industry average, implying very poor management of debt levels within the company. Return on equity has fallen greatly from the year-ago quarter. This is a signal of major weakness within the corporation. Shares have fallen 58% in the past year. Although this price decline could make the stock more attractive down the road, we feel that it is too soon to buy right now.

Delta Air Lines

(DAL) - Get Report

, an air carrier, has been initiated with a sell rating. For the first quarter, revenue increased 12% year over year to $4.77 billion, while net loss per share widened to $16.15 from 66 cents. The debt-to-equity ratio is very high at 2.31 and exceeds the industry average, implying very poor management of debt levels.

The quick ratio of 0.62 demonstrates an inability to cover short-term liquidity needs. The gross profit margin is currently extremely low at 11%. Net operating cash flow has decreased 21% from the year-ago quarter to $283 million. For 2008, the market is expecting a contraction in full-year EPS to a loss of $1.10 from a profit of $3.76 in 2007.

Additional ratings changes from May 28 are listed below.

Ticker

Company Name

Change

New Rating

Former Rating

ACS

Affiliated Computer Services

Upgrade

Buy

Hold

ADS

Alliance Data Systems

Upgrade

Buy

Hold

AHPI

Allied Health Care Products

Upgrade

Buy

Hold

BONT

Bon-Ton Stores

Downgrade

Sell

Hold

CBR

Ciber

Upgrade

Buy

Hold

CNK

Cinemark Holdings

Initiated

Sell

CPBY

China Information Security Technology

Initiated

Hold

CPS

Choicepoint

Upgrade

Buy

Hold

DAL

Delta Air Lines

Initiated

Sell

END

Endeavour International

Upgrade

Hold

Sell

HMN

Horace Mann Educators

Downgrade

Hold

Buy

HPC

Hercules

Upgrade

Buy

Hold

ITI

Iteris

Upgrade

Buy

Hold

MMPI

Meruelo Maddux Properties

Initiated

Sell

PNS

Pinnacle Data Systems

Upgrade

Hold

Sell

QSFT

Quest Software

Upgrade

Buy

Hold

SEE

Sealed Air

Downgrade

Hold

Buy

SLM

Sallie Mae

Downgrade

Sell

Hold

SPR

Spirit Aerosystems Holdings

Upgrade

Hold

Sell

STFC

State Auto Financial

Downgrade

Hold

Buy

TLP

Transmontaigne Partners

Upgrade

Buy

Hold

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