Each weekday, 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 forecasted company earnings. Objective elements include volatility of past operating revenue, financial strength and company cash flows. TheStreet.com Ratings has initiated coverage of independent power producer Mirant ( MIR) with a hold rating. The company's stock price has shot up 95.8% in the past twelve months. Net operating cash flow more than doubled in the first quarter of fiscal 2007 when compared to the same quarter a year ago. On the other hand, earnings have deteriorated during that same time period. Mirant lost 52 cents per share in the most recent quarter after earning $1.37 per share in first quarter of 2006. Oil and gas contract driller Union Drilling ( UDRL) has been upgraded to a hold from a sell. The company has demonstrated a pattern of positive earnings per share growth over the past two years. TheStreet.com Ratings expects this trend to continue. Union Drilling is in a solid financial position with reasonable debt levels by most measures. The company had been rated a sell since December 2006.
Computer printer manufacturer Lexmark ( LXK) has been downgraded to a hold from a buy. The company's net operating cash flow has decreased significantly, 60.5% in the first quarter of fiscal 2007 compared to the same quarter a year ago. Net income grew by just 7.2% during that same time period, below the average for the computer storage and peripherals industry. Lexmark had been rated a buy since October 2006. Dean Foods ( DF) has been downgraded to a hold from a buy. The company is one of the country's largest distributors of dairy products, as well as soymilk and other organic foods. TheStreet.com Ratings feels that the current gross profit margin for Dean Foods is lower than what is desirable, coming in at 27.8%. The net profit margin of 2.4% trails the industry average. Dean Foods had been rated a buy since November 2005. Furniture manufacturer Flexsteel ( FLXS) has been downgraded to a hold from a buy. Earnings per share fell 14.8% in the third quarter of 2007 compared to the same quarter a year ago. Sales and net income have also dropped during that same time period, underperforming the average competitor within its industry. The company's gross profit margin is essentially unchanged over the past fiscal year. Flexsteel had been rated a buy since February 2007. Pervasive Software ( PVSW) has been upgraded to a buy from a hold. PVSW provides data management software products to companies worldwide. The company's earnings per share doubled in the third quarter of fiscal 2007 compared to the third quarter of 2006. TheStreet.com Ratings expects more EPS growth in the future. Pervasive Software has a debt-to-equity ratio of zero and appears to be able to cover short-term cash needs. The company had been rated a hold since May 2005. Mexican Restaurants ( CASA) has been downgraded to a hold from a buy. The company operates Mexican-themed dining franchises including Crazy Jose's, Monterey's and Mission Burrito. The company swung to a loss in the fourth quarter of 2006, losing 12 cents per share after earning 45 cents per share for the same quarter the previous year. The company's stock price has taken a hit, declining 29.4% in the past twelve months. Mexican Restaurants had been rated a buy since May 2005.