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 June 27 Monolithic Power Systems ( MPWR) designs, develops and markets analog and mixed-signal semiconductors and has been upgraded to Buy. The revenue growth came in higher than the industry average of 20%. Since the same quarter one year prior, revenue rose by 45%. MPWR reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Monolithic Power turned its bottom line around by earning 22 cents vs. a loss of 9 cents in the prior year. This year, the market expects an improvement in earnings ($1.05 vs. 22 cents). The net income increased by 1,904% when compared to the same quarter a year ago, rising from a loss of $330,000 to $5.94 million.
Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Monolithic Power has been rated a Hold since December 2006. PepsiAmericas ( PAS) manufactures, distributes and markets beverage products in the United States, central and Eastern Europe, and the Caribbean. PAS has been downgraded to Hold. PAS's revenue growth has slightly outpaced the industry average of 14%. Since the same quarter one year prior, revenue rose by 14%. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, PepsiAmericas increased its bottom line by earning $1.66 vs. $1.22 in the prior year. This year, the market expects an improvement in earnings ($1.83 vs. $1.66). We consider a gross profit margin of 44% for Pepsi Americas strong. PAS's net profit margin of 2% is significantly lower than the same period one year prior. Net operating cash flow has significantly decreased to $10.30 million, or 84%, when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower. The debt-to-equity ratio of 1.25 is relatively high when compared with the industry average, suggesting a need for better debt level management. PepsiAmericas has been rated a Buy since February 2007. Pactiv ( PTV) engages in the manufacture and sale of consumer and specialty-packaging products for the consumer and foodservice/food packaging markets in the United States and internationally. The company operates in two segments, Consumer Products and Foodservice/Food Packaging. Pactiv has been downgraded to Hold. \
PTV's revenue growth has slightly outpaced the industry average of 19%. Since the same quarter one year prior, revenue rose by 19%. Net operating cash flow has decreased to $24 million, or 42.85%, when compared to the same quarter last year. The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Containers & Packaging industry average, but is greater than that of the S&P 500. Net income has significantly decreased from a year ago, falling from $57 million to $34 million. The gross profit margin for Pactiv is currently lower than what is desirable, coming in at 26%. Along with this, the net profit margin of 4% trails that of the industry average. Pactiv has been rated a Buy since June 2006. Ryland Group ( RYL) together with its subsidiaries, engages in home building and the provision of mortgage-finance in the United States. RYL has been downgraded to Sell. Net income has decreased by 20% when compared to the same quarter one year ago, dropping from a loss of $24.45 million to a loss of $29.32 million. Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. The gross profit margin for Ryland is currently extremely low, coming in at 8.4%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of negative 7% trails that of the industry average. Looking at the price performance of RYL's shares over the past 12 months, there is not much good news to report: the stock is down 40%, and it has underperformed the S&P 500 Index.
We feel the stock is still not a good buy right now. Ryland's earnings per share declined by 19% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, Ryland swung to a loss, reporting a loss of $7.93 vs. $7.84 in the prior year. This year, the market expects an improvement to a loss of $1.50. Ryland has been rated a Hold since April 2008. Guangshen Railway Company ( GSH), together with its subsidiaries, primarily provides railway passenger and freight transportation services between Guangzhou and Shenzhen in China, as well as long-distance passenger transportation services. Guangshen has been rated a Hold. GSH's very impressive revenue growth greatly exceeded the industry average of 14%. Since last year, revenue leaped by 84%. GSH's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems. Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 48% compared to the year-earlier quarter.
Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, GSH is still more expensive than most of the other companies in its industry. The gross profit margin for Guangshen is currently extremely low, coming in at 13%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 10% trails that of the industry average. Guangshen has not been previously rated. Additional ratings changes are listed below.
|Ticker||Company Name||Change||New Rating||Former Rating|
|FMR||First Mercury Financial||Upgrade||Hold||Sell|
|MPWR||Monolithic Power Systems||Upgrade||Buy||Hold|
|UBNK||United Financial Bancorp||Downgrade||Hold||Buy|