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 are from Feb. 20.

DryShips ( DRYS), a dry-bulk carrier, has been upgraded to buy. In the fourth quarter, the company grew revenue 195% year over year to $233.4 million. Net income came in at $195.2 million, or $5.37 a share, vs. $35.9 million, or $1.02 a share, a year ago. For 2008, the market expects an improvement in full-year income to $18.74 a share, vs. $13.26 in 2007.

This stock has surged 362% over the past year, and shares should continue to move higher despite the impressive gain. Return on equity has increased to 46% from 13% in the year-ago quarter. This is a signal of significant strength within the corporation. With a P/E of 6.32, the stock is cheaper than its industry peers. DryShips had been rated hold since Dec. 5.

Zimmer Holdings ( ZMH), a maker of reconstructive orthopedic implants, has been upgraded to buy. In the fourth quarter, revenue rose 15% year over year, and EPS rose 9.8% to $1.12. Net income increased 7.8% to $263.8 million.

With a debt-to-equity ratio of 0.02 and a quick ratio of 1.52, Zimmer demonstrates an ability to manage debt successfully and cover short-term liquidity needs. Net operating cash flow has increased 65% to $408.3 million year over year, surpassing the industry average cash flow growth rate of -3.5%. With a P/E of 23.47, Zimmer stock is cheaper than its industry peers, but more expensive than the S&P 500. The company had been rated hold since Oct. 25.

Ross Stores ( ROST - Get Report), an operator of off-price retail apparel and home accessories stores, has been upgraded to buy. For the third quarter of 2007, the company posted year-over-year revenue growth of 7.8%. Net income improved 11% to $48.7 million, and earnings per share jumped to 36 cents from 31 cents. We expect the company to continue its trend of earnings growth. Return on equity has improved slightly year over year and exceeds the industry average.

At 0.16, Ross Stores' debt-to-equity ratio is very low, implying successful management of debt levels. However, the company's quick ratio of 0.20 is very weak and demonstrates an inability to cover short-term cash needs. Ross Stores had been rated hold since Nov. 28.

United Therapeutics ( UTHR - Get Report), a biotechnology company, has been downgraded to hold. For the fourth quarter of 2007, year-over-year revenue growth of 31% greatly exceeded the industry average. However, net income declined to $2 million, or 8 cents a share, from $55.5 million, or $2.42 a share, a year ago. The company's gross profit margin of 91% is quite strong. However, its net profit margin has significantly decreased year over year to 3.3%.

United Therapeutics shares have jumped 74%, in the past year. This sharp appreciation should prompt investors to seek better opportunities elsewhere. With a price-to-earnings ratio (P/E) of 101.01, the stock is more expensive than the industry average. Return on equity has greatly decreased year over year and lags that of the S&P 500, but exceeds the industry average. United Therapeutics had been rated buy since Aug. 2, 2006.

Platinum Underwriters ( PTP), a provider of property and marine, casualty and finite risk reinsurance products, has been downgraded to hold. For the fourth quarter, the company's revenue declined 3.6% year over year, but EPS climbed 25% to $1.60 from $1.28. For 2008, the market foresees a contraction in full-year earnings per share to $4.90 from $5.39 in 2007.

At 0.13, Platinum's debt-to-equity ratio is very low and lags the industry average. During the past year, the stock's 8% price increase outpaced the S&P 500, reflecting strong earnings growth. With a P/E of 6.17, the stock is cheaper than its industry peers. Platinum Underwriters had been rated buy since Oct. 24, 2006.

Additional ratings changes from Feb. 20 are listed below.

Ticker Company Name Change New Rating Former Rating
ADO ADECCO SA Downgrade Hold Buy
ASYS AMTECH SYSTEMS INC Downgrade Hold Buy
AWRE AWARE INC Downgrade Sell Hold
DGII DIGI INTERNATIONAL INC Downgrade Hold Buy
NXY NEXEN INC Downgrade Hold Buy
ROST ROSS STORES INC Upgrade Buy Hold
UTHR UNITED THERAPEUTICS CORP Downgrade Hold Buy
ZRBA ZAREBA SYSTEMS INC Downgrade Sell Hold
KFS KINGSWAY FINANCIAL SVCS INC Downgrade Sell Hold
PDFS PDF SOLUTIONS INC Downgrade Sell Hold
ZMH ZIMMER HOLDINGS INC Upgrade Buy Hold
PTP PLATINUM UNDERWRITERS HLDG Downgrade Hold Buy
DRYS DRYSHIPS INC Upgrade Buy Hold
IRBT IROBOT CORP Upgrade Hold Sell
DR DARWIN PROFESSIONAL UNDWRTS Upgrade Hold Sell

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