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 31.

Aqua America ( WTR - Get Report), a holding company for regulated utilities that provide water or wastewater services, has been downgraded to hold. Strengths such as revenue growth and expanding profit margins are countered by a disappointing stock-price performance, unimpressive growth in net income and poor debt management. For the fourth quarter, revenue increased 8.9% year over year to $149.1 million, and earnings per share remained flat at 19 cents.

For 2008, the market expects an improvement in full-year EPS to 81 cents from 72 cents in 2007. At 49%, the company's gross profit margin is strong, but its net profit margin of 17% trails the industry average. The company's debt-to-equity ratio of 1.33 is high compared with the industry average. To add to this, its quick ratio of 0.53 demonstrates an inability to cover short-term liquidity needs. Aqua America had been rated buy since TheStreet.com Ratings initiated coverage on March 28, 2006.

Raymond James Financial ( RJF - Get Report), which through its subsidiaries underwrites, distributes, trades and brokers equity and debt securities, has been downgraded to hold. Robust revenue growth, a solid financial position and a reasonable valuation are balanced by a disappointing stock-price performance, weak return on equity and poor profit margins.

For the first quarter, revenue rose 17% year over year to $829.2 million, and earnings per share declined. The company's debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. Return on equity has slightly decreased from the same quarter one year prior, implying a minor weakness in the organization.

The gross profit margin, at 29%, is less than what is desirable. Raymond James Financial had been rated buy since TheStreet.com Ratings initiated coverage on March 28, 2006.

Steelcase ( SCS - Get Report), which designs, markets and manufactures office furniture, has been downgraded to hold. Strengths such as revenue growth and an increase in earnings per share are held back by poor profit margins, weak operating cash flow and a disappointing stock-price performance. For the fourth quarter, revenue rose 16% year over year to $901.3 million, and earnings per share climbed to 22 cents from 20 cents.

For 2008, the market expects an improvement in full-year EPS to $1.05 from 93 cents in 2007. Although Steelcase's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average. Furthermore, its quick ratio of 0.97 is somewhat weak and could be cause for future problems. The company's gross profit margin is low at 34% and its net profit margin of 3.4% trails that of the industry average. Net operating cash flow has declined marginally to $81.9 million year over year.

In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower. Steelcase had been rated buy since TheStreet.com Ratings initiated coverage on March 28, 2006.

Morningstar ( MORN - Get Report), a provider of independent investment research, has been downgraded to hold. A solid financial position, robust revenue growth and an impressive record of EPS growth are weighed down by a premium valuation.For the fourth quarter, revenue rose 36% year over year to $118.1 million, and EPS rose to 41 cents from 29 cents. Although Morningstar's debt-to-equity ratio is mixed in its results, its quick ratio of 1.63 is high and demonstrates strong liquidity.

Shares have outperformed the rise in the S&P 500, netting the stock a price-to-earnings ratio of 40.13, which makes it much more expensive than its industry peers. In addition, return on equity has slightly decreased from the year-ago quarter to 18%. This implies a minor weakness in the organization. Morningstar had been rated buy since Feb. 1.

Liberty Media Capital ( LCAPA), which provides video programming and communications technology and services, has been downgraded to sell. The company's gross profit margin is extremely low at 7.50%, although its net profit margin of 66% has significantly outperformed the industry average. Liberty Media Capital has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance in the coming year. The market expects a 12% contraction in 2008 earnings per share to $10.18 from $11.57 in 2007.

Net operating cash flow has increased 51% to $157 million year over year, but the company is still growing at a significantly lower rate than the industry average. Shares are down 86% in the past year, netting the stock a price-to-earnings ratio of 1.37, which makes it extremely cheap compared with others in its industry. Right now, however, we believe that it is too soon to buy. Liberty Media Capital had been rated hold since Jan. 7.

Additional ratings changes from March 31 are listed below.

Ticker Company Name Change New Rating Former Rating
LCAPA LIBERTY MEDIA CAPITAL GROUP Downgrade Sell Hold
LCAPB LIBERTY MEDIA CAPITAL GROUP Downgrade Sell Hold
CELL BRIGHTPOINT INC Downgrade Hold Buy
PFIN P & F INDUSTRIES Downgrade Sell Hold
ACCL ACCELRYS INC Downgrade Sell Hold
WTR AQUA AMERICA INC Downgrade Hold Buy
RJF RAYMOND JAMES FINANCIAL CORP Downgrade Hold Buy
SCS STEELCASE INC Downgrade Hold Buy
TAGS TARRANT APPAREL GROUP Downgrade Sell Hold
TIE TITANIUM METALS CORP Downgrade Hold Buy
WTSLA WET SEAL INC Upgrade Hold Sell
MORN MORNINGSTAR INC Downgrade Hold Buy
JMGE JMG EXPLORATION INC Initiated Sell
OMRI OMRIX BIOPHARMACEUTICALS Downgrade Sell Hold
NLST NETLIST INC Initiated Sell

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