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 company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows. TheStreet.com Ratings has initiated coverage of biotech firm Bionovo ( BNVI) with a sell rating. The company develops drugs to treat breast and ovarian cancers, and for menopause. The company's losses continue to grow -- Bionovo lost 5 cents per share in the first quarter of fiscal 2007 after losing 2 cents per share in the same quarter a year earlier. Net operating cash flow was down 42.3% during that same time period. TheStreet.com Ratings has initiated coverage of paper and packaging producer KapStone ( KPPC) with a hold rating. The company made dramatic gains in earnings per share during the first quarter, when EPS rose to 21 cents per share from just 2 cents per share a year earlier. Investors reacted to KapStone's improved performance by pushing the stock price up 34.3% over the past 12 months. At the same time, TheStreet.com Ratings feels that profit margins remain lower than what is desirable. The company's gross profit margin is just 26.5%, while the net profit margin of 10.8% trails the industry average.
Produce distributor Chiquita ( CQB) has been upgraded to a hold from a sell. The company's stock has been a solid performer, gaining 28.4% over the 12 months, despite the fact that the company swung to a loss in the first quarter of fiscal 2007 compared with the year earlier period. Analysts are expecting improved earnings in the coming year. Chiquita had been rated a sell since November 2006. Specialty retailer Williams-Sonoma ( WSM) has been downgraded to a hold from a buy. In addition to its flagship kitchen goods business, the company also markets the Pottery Barn line of home furnishings through retail stores, catalogs and the Internet. Earnings per share were off 20% in the first quarter of fiscal 2007 compared with the year-earlier period. The market is expecting further EPS contraction in the coming year. The company's current 17.5% return on equity trails the industry average significantly. Williams-Sonoma had been rated a buy since February 2007. Energy trader AES ( AES) has been downgraded to a hold from a buy. The company's return on equity has fallen to just 9.4%, well behind the industry average of 53.6%. In spite of this, AES stock has a price-to-earnings ratio of 57.8, a significantly higher valuation than many of its peers, who have an average P/E of 30.7. TheStreet.com Ratings considers the company's 27.1% gross profit margin to be lower than what is desirable. AES had been rated a buy since October 2006.