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 Friday, May 30.

Dress Barn

( DBRN), an apparel retailer, has been upgraded to buy. For the third quarter of fiscal 2008, revenue increased 1.3% year over year to $352.6 million, and earnings per share increased to 39 cents from 33 cents. At 41%, the gross profit margin is strong.

The net profit margin of 7.1% exceeds the industry average. The company's debt-to-equity ratio is very low at 0.27, implying successful management of debt levels. However, its quick ratio of 0.61 shows weak liquidity. With a price-to-earnings ratio of 11.91, the stock trades at a discount to others in its sector. Dress Barn had been rated hold since Dec. 4.

Financial Federal

(FIF) - Get Report

, which provides collateralized lending, financing and leasing services, has been upgraded to buy. For the second quarter, revenue grew 2.8% year over year to $48.7 million, and earnings per share improved to 51 cents from 46 cents.

For 2008, the market expects an improvement in full-year EPS to $2.03 from $1.90 in 2007. Net operating cash flow has significantly increased to $15.3 million from the year-ago quarter. In addition, the company has vastly surpassed the industry average cash flow growth rate of 94%. The gross profit margin is currently very high at 85%. The net profit margin of 26% significantly outperformed against the industry. With a price-to-earnings ratio of 12.3, the stock trades at a discount to its sector peers. Financial Federal had been rated hold since Nov. 21.

LifePoint Hospitals

(LPNT)

, which through its subsidiaries owns and operates general acute care hospitals, has been upgraded to buy. For the first quarter, revenue increased 5.9% year over year to $699.9 million, and earnings per share improved to 72 cents from 69 cents. Net operating cash flow increased 58% to $101 million from the year-ago quarter.

For 2008, the market expects an improvement in full-year EPS to $2.46 from $2.21 in 2007. With a price-to-earnings ratio of 14.46, the stock trades at a discount to others in its industry. LifePoint Hospitals had been rated hold since Aug. 7.

Calavo Growers

(CVGW) - Get Report

, which procures avocados and other perishable commodities, has been downgraded to hold. Strengths such as revenue growth, good cash flow from operations and a solid financial position are balanced by deteriorating net income, poor profit margins and disappointing return on equity. For the first quarter, revenue grew 26% year over year to $72.2 million, while earnings per share declined to 5 cents from 9 cents.

For 2008, the market expects an improvement in full-year EPS to 63 cents from 50 cents. The gross profit margin is extremely low at 9.1% and has decreased from the year-ago quarter. The net profit margin of 1% trails that of the industry average. With a price-to-earnings ratio of 30.41, the stock trades at a premium to others in its sector. Calavo Growers had been rated buy since Jan. 18.

Ameristar Casinos

(ASCA)

, which operates casino entertainment facilities, has been downgraded to sell. For the first quarter, revenue increased 25% year over year to $324.8 million, while earnings per share swung to a loss of $1.07 from a profit of 41 cents. The debt-to-equity ratio is very high at 3.68, implying very poor management of debt levels. The quick ratio of 0.54 demonstrates an inability to cover short-term liquidity needs.

Return on equity has greatly decreased when compared with its ROE from the same quarter one year prior and trails the industry average. This is a signal of major weakness within the corporation. At 44%, the gross profit margin is strong. The negative net profit margin of 19% significantly underperformed the industry average. Shares have tumbled 39% year over year. Although the decline in price may make the stock attractive down the road, right now we feel it is too soon to buy. Ameristar Casinos had been rated hold since Jan. 30.

Additional ratings changes from May 30 are listed below.

Ticker

Company Name

Change

New Rating

Former Rating

APSG

Applied Signal Technology

Upgrade

Buy

Hold

ASCA

Ameristar Casinos

Downgrade

Sell

Hold

CODI

Compass Diversified Holdings

Upgrade

Hold

Sell

CVGW

Calavo Growers

Downgrade

Hold

Buy

DBRN

Dress Barn

Upgrade

Buy

Hold

FIF

Financial Federal

Upgrade

Buy

Hold

JST

Jinpan International

Upgrade

Buy

Hold

LPNT

Lifepoint Hospitals

Upgrade

Buy

Hold

MTSC

MTS Systems

Upgrade

Buy

Hold

RNN

Rexahn Pharmaceuticals

Initiated

Sell

SWS

SWS Group

Upgrade

Buy

Hold

TRAC

Track Data

Upgrade

Hold

Sell

TSFG

South Financial Group

Downgrade

Sell

Hold

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