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 July 18. LaBranche ( LAB) through its subsidiaries, operates as a registered broker-dealer that specializes in equity securities and rights listed on the New York Stock Exchange. LAB has been upgraded to hold. The net income increased by 94% when compared with the same quarter one year prior, rising from -$368.94 million to -$21.34 million. Compared to where it was trading a year ago, LAB's share price has not changed very much due to the relatively weak year-over-year performance of the overall market, the company's stagnant earnings and other mixed results.
The company's current return on equity greatly increased when compared with its ROE from the same quarter one year prior. The debt-to-equity ratio is very high at 7.97 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. LAB has been rated a sell since July 2007. CME ( CME) operates two self-regulatory futures exchanges, CME and CBOT. CME has been downgraded to hold. CME's very impressive revenue growth greatly exceeded the industry average of 22.1%. Since the same quarter one year prior, revenues leaped by 72%. CME's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average. CME's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 42%, which is also worse than the performance of the S&P 500 Index. 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, CME is still more expensive than most of the other companies in its industry. CME has been rated a buy since July 2006. Investment Technology Group ( ITG) operates as an agency brokerage and technology company, which provides solutions spanning the investment process in North America, Europe, Asia and Australia. ITG has been downgraded to hold.
The revenue growth greatly exceeded the industry average of 49%. Since the same quarter one year prior, revenues rose by 21%. The net income increased by 34% when compared with the same quarter one year prior, rising from $24.71 million to $32.99 million. ITG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 36%, which is also worse than the performance of the S&P 500 Index. ITG has been rated a buy since July 2006. Matsushita Electric Industrial ( MC) through its subsidiaries, produces and sells electronic and electric products for consumer, business and industrial uses. It operates through five segments: AVC Networks, Home Appliances, Components and Devices, MEW and PanaHome, and Other. MC has been downgraded to hold. During the past fiscal year, MC increased its bottom line by earning $1.33 vs. 84 cents in the prior year. This year, the market expects an improvement in earnings ($1.40 vs. $1.33). 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. We believe that the combination of its price rise over the last year and its current P/E ratio relative to its industry tends to reduce its upside potential. The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared with the Household Durables industry average, but is greater than that of the S&P 500.
The net income increased by 321% when compared with the same quarter one year prior, rising from $211.55 million to $890 million. The gross profit margin for MC is currently lower than what is desirable, coming in at 34. MC has been rated a buy since February 2008. New Oriental Education & Technology Group ( EDU) provides private educational services based on the number of program offerings, total student enrollments and geographic presence in the People's Republic of China. EDU has been initiated at hold. Since the same quarter one year prior, revenues leaped by 53%. EDU has no debt to speak of resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. The gross profit margin for EDU is rather high; currently it is at 56%. Despite the strong results of the gross profit margin, EDU's net profit margin of 4% significantly trails the industry average. Powered by its strong earnings growth of 267% and other important driving factors, this stock has surged by 36% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we believe that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. EDU has not previously been rated. Additional ratings changes are listed below.
|Ticker||Company Name||Change||New Rating||Former Rating|
|CRBC||Citizens Republic Bancorp||Downgrade||Sell||Hold|
|EDU||New Oriental Ed & Tech||Initiated||Hold|
|ITG||Investment Technology Group||Downgrade||Hold||Buy|
|MPAA||Motorcar Parts of America||Upgrade||Hold||Sell|