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 were generated on March 26.

BEA Systems ( BEAS), a provider of enterprise application and service infrastructure, has been downgraded to hold. A solid stock price performance and growth in earnings per share are balanced by a disappointing return on equity. For the fourth quarter, revenue rose 13% year over year to $440.9 million, and earnings per share swung to a profit of 18 cents from a loss of 25 cents. This year, the market expects an improvement in full-year EPS to 78 cents from 49 cents in 2007. BEA Systems' gross profit margin is very high at 79%, but its net profit margin of 17% has fallen year over year.

Oracle ( ORCL - Get Report) agreed this year to buy BEA Systems for $8.5 billion, or $19.38. Shares have risen to meet the offer price, reducing the stock's upside potential. BEA Systems had been rated buy since March 24, 2006.

Infosys ( INFY - Get Report), a technology services company, has been downgraded to hold. Strengths such as robust revenue growth, a solid financial position and impressive EPS growth are held back by a disappointing stock-price performance and weak return on equity. For the third quarter, revenue rose 32% year over year to $1.08 billion, and earnings per share improved to 54 cents from 38 cents. The company has no debt to speak of and maintains a quick ratio of 5.59, which clearly demonstrates the ability to cover short-term cash needs. At 45% the gross profit margin is strong, and a net profit margin of 29% significantly outperformed the industry average.

Shares have fallen 29% in the past year, netting the stock a price-to-earnings ratio of 19.38, which makes it cheaper than others in its sector. But due to other concerns, we feel the stock is still not a good buy right now. Infosys Technologies had been rated buy since TheStreet.com Ratings initiated coverage on March 24, 2006.

Coventry Health Care ( CVH), a managed health care company, has been downgraded to hold. Strengths such as robust revenue and earnings-per-share growth are countered by weak operating cash flow, poor profit margins and a disappointing stock-price performance. For the fourth quarter, revenue rose 44% year over year to $2.79 billion, and earnings per share rose to $1.18 from 97 cents. For 2008, the market expects an improvement in full-year EPS to $4.45 from $3.98 in 2007.

The company's debt-to-equity ratio, 0.50, is low, implying successful management of debt levels. However, its quick ratio of 0.96 is somewhat weak and could be cause for future problems. Coventry's gross profit margin is low at 30%, but its net profit margin of 6.6% is above the industry average. Net operating cash flow has significantly decreased year over year and lags the industry average. Coventry Health Care had been rated buy since TheStreet.com Ratings initiated coverage on March 26, 2006.

First Horizon ( FHN - Get Report), a holding company for First Tennessee Bank National Association, offers retail and commercial banking, mortgage banking and capital markets services. The stock has been downgraded to sell. For the fourth quarter, revenue fell 31% year over year to $638.1 million, and earnings per share swung to a loss of $2.00 from a profit of 60 cents. Return on equity has greatly decreased over the same period and trails the industry average. This is a signal of major weakness within the corporation. First Horizon's gross profit margin is low at 26%, and its net loss margin of 39% is significantly below that of the industry average. Net operating cash flow has significantly decreased to a loss of $32 million.

Shares have tumbled 58% in the past year. The decline should not necessarily be interpreted as a negative; it could make the stock attractive down the road. Right now, however, we believe that it is too soon to buy. First Horizon had been rated hold since June 29.

iStar Financial ( SFI), which provides custom-tailored financing to high-end private and corporate owners of real estate, has been downgraded to sell. For the fourth quarter, revenue increased 62% year over year to $436.9 million, but earnings per share swung to a loss of 66 cents from a 60-cent profit. For 2008, the market expects an improvement in full-year EPS to $3.60 from $1.28 in 2007. The company's return on equity has slightly decreased to 5.8% over the same period. This implies a minor weakness in the organization.

Shares have tumbled 67% in the past year, worse than the S&P 500's performance. The plunge in price has netted the stock a price-to-earnings ratio of 12.28, making it significantly cheaper than others in its industry. But due to other concerns, we feel the stock is still not a good buy right now. iStar Financial had been rated hold since TheStreet.com Ratings initiated coverage on March 24, 2006.

Additional ratings changes from March 26 are listed below.

Ticker Company Name Change New Rating Former Rating
AMSWA AMERICAN SOFTWARE Downgrade Hold Buy
BKR BAKER (MICHAEL) CORP Downgrade Hold Buy
BEAS BEA SYSTEMS INC Downgrade Hold Buy
CHKE CHEROKEE INC/DE Upgrade Buy Hold
PLCE CHILDRENS PLACE RETAIL STRS Downgrade Sell Hold
CVH COVENTRY HEALTH CARE INC Downgrade Hold Buy
FHN FIRST HORIZON NATIONAL CORP Downgrade Sell Hold
FTEK FUEL TECH INC Upgrade Buy Hold
CXPO CRIMSON EXPLORATION INC Downgrade Sell Hold
HAST HASTINGS ENTERTAINMENT INC Upgrade Buy Hold
INFY INFOSYS TECHNOLOGIES LTD Downgrade Hold Buy
JUPM JUPITERMEDIA CORP Downgrade Sell Hold
SFI ISTAR FINANCIAL INC Downgrade Sell Hold
PRE PARTNERRE LTD Downgrade Hold Buy
TEN TENNECO INC Upgrade Hold Sell
TTMI TTM TECHNOLOGIES INC Upgrade Buy Hold
UBFO UNITED SECURITY BANCSHARS CA Downgrade Hold Buy
ENH ENDURANCE SPECIALTY HOLDINGS Downgrade Hold Buy
AWI ARMSTRONG WORLD INDUSTRIES Initiated Sell
DVR CAL DIVE INTERNATIONAL INC Initiated Sell
OMPI OBAGI MEDICAL PRODUCTS INC Initiated Sell
HBNK HAMPDEN BANCORP INC Initiated Sell
EIG EMPLOYERS HOLDINGS INC Upgrade Hold Sell

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