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.

BJ's Restaurants ( BJRI) owns and operates casual dining restaurants in the U.S. It has been downgraded to hold from buy. The company's third-quarter revenue grew by 30.1% compared with the same period last year, outpacing the industry average of 0.6%. In addition, BJ's has no debt to speak of, which we consider to be a relatively favorable sign. It also maintains a quick ratio of 1.82, which demonstrates the company's ability to cover short-term liquidity needs. BJ's stock is reasonably valued. As a counter to these strengths, weaknesses include disappointing return on equity, poor profit margins and weak operating cash flow, and the company's stock price has fallen by 17.98% in the last 12 months. BJ's had been rated buy since December 2005.

First Community Bancorp ( FCBP) is the holding company for Pacific Western Bank. It has been downgraded to hold from buy. The company's third-quarter revenue rose by 12.9% compared with the same period last year, trailing the industry average of 16.3%. Its return on equity improved slightly over the same period, which can be construed as a modest strength within the organization. The company also shows good cash flow from operations. However, First Community's earnings fell to 77 cents a share in the third quarter compared with 88 cents a share in the same period last year. In addition, the company's share price has fallen by 22.28% from its year-ago level. Looking ahead, TheStreet.com Ratings do not see anything in the company's numbers that would change the one-year trend. First Community Bancorp had been rated buy since December 2005.

First Citizens Bancshares ( FCNCA) is the holding company for First-Citizens Bank & Trust Company and Ironstone Bank. It has been downgraded to hold from buy. The company's third-quarter revenue rose by 8% compared with the same period last year, underperforming the industry average of 16%. First Citizens demonstrates good cash flow from operations and expanding profit margins. As a counter to these strengths, the company has posted a disappointing return on equity, and its third-quarter net income declined by 31.3% to $22.62 million from $32.93 million in the same period last year. First Citizens' share price has fallen by 26.88% in the last 12 months, and although the stock is down sharply from a year ago, based on its current price in relation to earnings, it is still more expensive than most of its industry peers. First Citizens had been rated buy since December 2005.

Transportation, e-commerce and business services company FedEx ( FDX) has been downgraded to hold from buy. The company's revenue rose by 5.9% in the second quarter of its fiscal 2008 when compared with the same period last year, outpacing the industry average of 4.5%. Its debt-to-equity ratio of 0.16 is very low and below that of the industry average, implying that there has been very successful management of debt levels. However, its third-quarter net income fell by 6.3% to $479 million, or $1.54 per share, from $511 million, or $1.64 a share, in the same period last year. In addition, the company's return on equity has been disappointing, and profit margins have been poor. FedEx had been rated buy since December 2005.

MIPS Technologies ( MIPS) develops embedded processors and related intellectual property for use in markets that include wireless communications, office automation, security and automotive. It has been downgraded to sell from hold. The company swung to a loss of $7.03 million, or 16 cents a share, in the first quarter of its fiscal 2008 from net income of $2.32 million, or five cents a share, in the same period last year. This continued a trend of declining EPS over the past two years. Its return on equity has greatly decreased over the same timeframe. MIPS' share price has tumbled by 39.88% in the last 12 months; in one sense, the sharp decline is a positive for future investors, making it cheaper (in proportion to earnings over the past year) than most other stocks in its industry. But due to other concerns, TheStreet.com Ratings believe the stock is not a good buy right now. MIPS had been rated hold since Nov. 12, prior to which it had been rated buy since July 2007.

Restoration Hardware ( RSTO) manufactures and sells specialty hardware and furniture. It has been downgraded to sell from hold. The company's net loss widened to $15.19 million, or 39 cents a share, in the third quarter compared with a loss of $5.71 million, or 14 cents per share, in the same period last year. Its debt-to-equity ratio of 2.25 is higher than the industry average, implying very poor management of debt levels. Restoration Hardware's return on equity in the third quarter slightly decreased from the same period last year, implying a minor weakness in the organization. Its share price has gone down by 23.15% in the last 12 months. Even though the stock is now selling for less than others in its industry relative to its current earnings, that is not reason enough to justify a buy rating at this time. Restoration Hardware was upgraded to hold on Dec. 10, in part due to Sears' bid to purchase the company. Prior to that, it had been rated sell since August 2007.

Sonic ( SONC) operates and franchises a chain of quick-service drive-in restaurants. It has been downgraded to hold from buy. The company's fourth-quarter revenue increased by 13.3%, exceeding the industry average of 0.6%. It has also demonstrated a two-year pattern of EPS growth. Fourth-quarter earnings rose 17.2% to 34 cents a share from 29 cents a share in the same period last year. We believe this trend will continue. Despite Sonic's mixed results in its debt-to-equity ratio, its quick ratio of 0.55 is low and demonstrates weak liquidity. The company's weaknesses include weak operating cash flow and a stock price that has declined by 8.14% in the last 12 months. The stock is cheaper than others in its industry relative to current earnings, but that is not reason enough to justify a buy rating at this time. Sonic had been rated buy since Oct. 23, prior to which it had been rated hold since January 2007.

Food Technology Service ( VIFL) owns an irradiation facility in Florida that uses gamma radiation to sterilize medical devices, food and consumer goods. It has been downgraded to hold from buy. The company's third-quarter revenue rose by 27.4% compared with the same period last year, exceeding the industry average of 0.9%. Its debt-to-equity ratio of 0.27 is very low and below that of the industry average, implying that there has been successful management of debt levels. However, its quick ratio of 0.61 displays a potential problem covering short-term cash needs. Food Technology's return on equity improved to 20.95% in the third quarter from 4.12% in the same period last year, a signal of significant strength within the organization. Looking ahead, while the company's share price increased by 8.4% in the last 12 months, our view is that the company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market. Food Technology Services had been rated buy since Nov. 6, before which it had been rated hold since December 2005.

Sirona Dental Systems ( SIRO) manufactures and sells advanced dental equipment worldwide in four primary areas: dental CAD/CAM systems, imaging systems, treatment centers and instruments. It has been upgraded to hold from sell. The company's fourth-quarter revenue rose by 31.3% compared with the same period last year, outperforming the industry average of 2.8%. Sirona Dental swung to fourth-quarter earnings of 93 cents per share compared with a loss of three cents a share in the same period last year, continuing a year-long pattern of earnings growth. We feel this trend will continue. Its debt-to-equity ratio of 0.92 is rather low, but is high when compared with the industry average, implying that the management of debt levels should further evaluated. Sirona Dental had been rated sell since coverage was initiated in August 2007.

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

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