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. Broadway Financial ( BYFC) is the holding company for Broadway Federal Bank, a provider of savings and loan products in Mid-City and South Los Angeles. It has been downgraded to a hold from a buy. It is reasonably valued, and its profit margins are expanding. The company's revenue grew by 18.6% in the second quarter compared with the same period last year, though the growth does not seem to have trickled down to its bottom line. Earnings decreased 36.85% in the same time frame, to 12 cents per share in the second quarter from 19 cents per share a year earlier. As a counter to its strengths, the company has had a trend of declining EPS over the past two years, weak operating cash flow and its stock price has fallen 3.66% in the last 12 months. Broadway Financial had been rated a buy since September 2005.
Securities and banking firm SWS Group ( SWS) has been downgraded to a hold from a buy. The company's revenue increased by 14.4% in the fourth quarter of its fiscal-year 2007 compared with the same period last year, and net income increased by 27.6% to $6.95 million in the same timeframe. Its return on equity improved slightly to 12.24% from 9.89%, although it still trails that of both the industry average and the S&P 500. However, the company's cash flow has been weak overall, and its stock price has gone down by 27.32% in the last three months. SWS Group had been rated a buy since November 2005. YPF Sociedad Anonima ( YPF) engages in the exploration, development and production of natural gas, oil and gas in Argentina. It has been downgraded to a hold from a buy. While its second-quarter revenue grew 3.6% over the year-earlier period, it trailed the industry average of 4.4%. And although the company's debt-to-equity ratio of 0.07 is considered low, it is higher than that of the industry average. The company's EPS declined by 33.34% in the second quarter compared with the same period last year, and its stock price is down 10.16% in the last three months. TheStreet.com Ratings does not see anything in the company's numbers to reverse the stock price's decline. Despite the slump, the stock is still selling for more than most others in its industry. YPF Sociedad Anonima had been rated a buy since December 2006.
American Railcar Industries ( ARII) designs, manufactures and markets covered hopper and tank railcars in North America. It has been downgraded to a sell from a hold. The company's stock price has declined by 22.48% in the last 12 months and could fall further in the next year. Its gross profit margin of 13.90% is considered low, and net profit margin of 5.30% trails the industry average. Net income increased 1.9% to $11.03 million in the second quarter of 2007, up from $10.82 million in the same period in 2006. American Railcar had been rated a hold since July 2007. Topps ( TOPP) markets and distributes candy and entertainment products. It has been downgraded to a hold from a buy. The company has demonstrated a pattern of positive EPS growth over the past year, a trend TheStreet.com Ratings believes will continue. Net income increased by 181.9% to $1.09 million in the first quarter of fiscal 2008 compared with $390,000 in the same period last year. Topps also shows reasonable debt levels by most measures. As a counter to these strengths, it shows a weak operating cash flow and a stock price decline of 9.0% in the last three months. The hold rating also takes into account that Topps is in the midst of a bidding war. TheStreet.com Ratings downgraded the stock to a hold because it believes the deal will eventually go through and because based on its current price level and potential for future growth, its upside is limited. Topps had been rated a buy since July 2007.