TSC Ratings' Updates: Nobel Learning

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 prices 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 30.

Nobel Learning Communities ( NLCI), which operates a network of private schools, has been upgraded to buy. Since the same quarter last year, its revenue increased slightly by 8%, outpacing the industry average. EPS has improved by 26% in the most-recent quarter compared with one year ago. Net income also increased, rising 0.5%, which is below the industry average but still outpacing the S&P 500. Nobel Learning had been rated hold since May 8.

Martha Stewart Living Omnimedia ( MSO), an integrated media and merchandise company, has been upgraded to hold. It reported significant EPS improvement in the most-recent quarter compared with last year and turned its bottom line around by earning 19 cents vs. a loss of 32 cents in the prior year. Net income also increased, rising 104% compared with the same quarter last year. At 52%, the gross profit margin is rather high but the net profit margin of 0.40% trails the industry average. Stock share price has done poorly compared with a year ago, but overall market trend is seen as a significant factor. Martha Stewart Living had been rated sell since May 7, 2007.

Casual apparel retailer Abercrombie & Fitch ( ANF) has been downgraded to hold. The company has improved earnings per share by 6% in the most-recent quarter and also shows a positive EPS growth pattern over the past two years. The company has no debt to speak of but a relatively high quick ratio of 0.61 displays a potential problem in covering short-term cash needs. The company is off 18% from its price level one year ago and net operating cash flow has decreased 879% to -$17 million compared with the same quarter last year. Abercrombie & Fitch had been rated buy since ratings were initiated on July 28, 2006.

Semiconductor supplier Vishay Intertechnology ( VSH) has been downgraded to sell. Compared with the same quarter one year ago, income has fallen 1,920% to -$741 million. Return on equity has also greatly decreased, signaling a major weakness in the company. Its profit margin of 23% is rather low and a net profit margin of -95% is significantly lower than the industry average. Over the past year the stock has tumbled 42% and the company's EPS has fallen by 1,909%. Vishay had been rated hold since Sept. 14, 2007.

Investors Bancorp ( ISBC), which operates as a holding company for Investors Savings Bank, has been downgraded to sell. Its return on equity has decreased from the same quarter one year ago, signifying a minor weakness in the company. During the past fiscal year, reported earnings were at 17cents, 4 cents lower than the 21 cents of a year ago. Gross profit margin is a strong 36% but a net profit margin of 6.8% still trails the industry average. Investors Bancorp had been rated hold since July 30, 2007.

Additional ratings changes from July 30 are listed below.

Ticker Company Name Change New Rating Former Rating
ANF Abercrombie & Fitch Downgrade Hold Buy
APOL Apollo Group Inc. Upgrade Buy Hold
BLSW Bridgeline Software Inc. Initiated Sell
CBI Chicago Bridge & Iron Company Downgrade Hold Buy
CSCD Cascade Microtech Inc. Downgrade Sell Hold
ISBC Investors Bancorp Inc. Downgrade Sell Hold
MSO Martha Stewart Living Omnimedia Inc. Upgrade Hold Sell
NLCI Nobel Learning Communities Inc. Upgrade Buy Hold
OSIS OSI Systems Inc. Downgrade Hold Buy
POZN Pozen Inc. Upgrade Hold Sell
SCMM SCM Microsystems Inc. Downgrade Sell Hold
VSH Vishay Intertechnology Downgrade Sell Hold

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

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