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 Monday, Aug. 25.

Simpson Manufacturing ( SSD) was upgraded from hold to buy. Simpson Manufacturing, through its subsidiaries, engages in the manufacture and marketing of building products. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

SSD's debt-to-equity ratio is zero, currently below the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.72, which clearly demonstrates the ability to cover short-term cash needs.

We consider Simpson's gross profit margin of 41.70% to be strong. Regardless of SSD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SSD's net profit margin of 9.3% compares favorably with the industry average.

Despite the weak revenue results, SSD has outperformed against the industry average of 21.0%. Since the same quarter one year prior, revenue has slightly dropped by 5.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

The change in net income from the same quarter one year ago has significantly exceeded that of the building products industry average, but is less than that of the S&P 500. Net income has significantly decreased by 28% when compared with the same quarter one year ago, falling from $28.32 million to $20.38 million.

The share price of SSD has not done very well: It is down 21.82% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared with the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

SSD had been rated a hold since Nov. 23, 2007.

Alexandria Real Estate Equities ( ARE) has been upgraded from a hold to buy. Alexandria Real Estate Equities, a real estate investment trust (REIT), engages in the ownership, operation, management, development, acquisition and redevelopment of properties for the life sciences industry.

The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, growth in earnings per share, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

ARE's revenue growth has slightly outpaced the industry average of 10.2%. Since the same quarter one year prior, revenue rose by 17.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential even though it has already risen in the past year.

ARE has improved earnings per share by 6.3% in the most recent quarter compared with the same quarter a year ago. The company has demonstrated a pattern of positive earnings-per-share growth over the past two years. During the past fiscal year, ARE increased its bottom line by earning $2.35 vs. $2.08 in the prior year.

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the real estate investment trusts industry. The net income increased by 18.2% when compared with the same quarter one year prior, going from $24.05 million to $28.42 million.

Net operating cash flow has increased to $56.21 million or 13.59% when compared with the same quarter last year. Despite an increase in cash flow, ARE's average is still marginally south of the industry average growth rate of 19.86%.

ARE had been rated a hold since May 7, 2007.

Markwest Energy Partners ( MWE) has downgraded from buy to hold. MarkWest Energy Partners and subsidiaries engage in the gathering, transportation and processing of natural gas in the U.S. It also transports, fractionates and stores natural gas liquids, as well as engages in the gathering and transportation of crude oil.

The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally poor debt management.

The gross profit margin for MWE is currently very high, coming in at 617.10%. It has increased significantly from the same period last year. Along with this, the net profit margin of 516.30% significantly outperformed against the industry average.

Net operating cash flow has significantly increased by 101.52% to $40.73 million when compared with the same quarter last year. In addition, MWE has also vastly surpassed the industry average cash flow growth rate of 20.14%.

Compared with where it was trading a year ago, MWE's share price has not changed very much because of relatively weak year-over-year performance of the overall market, the company's stagnant earnings and other mixed results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down on the basis of the push and pull of the broad market.

MWE has experienced a steep decline in earnings per share in the most recent quarter in comparison with its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, MWE swung to a loss, reporting -45 cents vs. $2.25 in the prior year. For the next year, the market is expecting a contraction of 321.1% in earnings (-$1.90 vs. -45 cents).

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared with the S&P 500 and the oil, gas and consumable fuels industry. The net income has significantly decreased by 2344.5% when compared with the same quarter one year ago, falling from -$7.27 million to -$177.77 million.

MWE had been rated a buy since Aug. 25, 2006.

Sony ( SNE) has been downgraded from buy to hold. Sony, together with its subsidiaries, engages in the development, design, manufacture and sale of electronic equipment, instruments and devices for consumer and industrial markets in Japan, the U.S., Europe and internationally.

The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and weak operating cash flow.

SNE's revenue growth trails the industry average of 28.3%. Since the same quarter one year prior, revenue rose by 16.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that SNE's debt-to-equity ratio is low, the quick ratio, which is currently 0.59, displays a potential problem in covering short-term cash needs.

The share price of SNE is down 18.57% when compared with where it was trading one year earlier. This reflects both the trend in the overall market as well as the sharp decline in the company's earnings per share. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared with that of the S&P 500 and greatly underperformed compared with the household durables industry average. The net income has significantly decreased by 38.9% when compared with the same quarter one year ago, falling from $540 million to $330 million.

SNE had been rated a buy since Dec. 6, 2007.

Provident Energy ( PVX) has been downgraded from hold to sell. Provident Energy Trust operates as an open-end investment trust in Canada and the U.S. The company, through its subsidiaries, engages in the acquisition, development, exploitation, production and marketing of crude oil and natural gas in western Canada.

The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and poor profit margins.

PVX has experienced a steep decline in earnings per share in the most recent quarter in comparison with its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, PVX swung to a loss, reporting -6 cents vs. 70 cents in the prior year.

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared with that of the S&P 500 and the oil, gas and consumable fuels industry. The net income has significantly decreased by 298.4% when compared with the same quarter one year ago, falling from -$46.20 million to -$184.08 million.

Return on equity has greatly decreased when compared to its return on equity from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the oil, gas and consumable fuels industry and the overall market, PVX return on equity significantly trails that of both the industry average and the S&P 500.

Net operating cash flow has decreased to $46.47 million or 45.89% when compared with the same quarter last year. In addition, when comparing it with the industry average, the firm's growth rate is much lower.

The gross profit margin for PVX is currently lower than what is desirable, coming in at 28.40%. Regardless of PVX's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PVX's net profit margin of -20.70% significantly underperformed when compared with the industry average.

PVX had been rated a hold since Nov. 28, 2007.

Additional ratings changes from Aug. 25 are listed below.
Ticker Company Name Change New Rating Former Rating
ANH Anworth Mtg Asset Corp Upgrade Hold Sell
ARE Alexandria Real Estate Equities Upgrade Buy Hold
CSUN China Sunergy Co Ltd Initiated Hold
GOK Geokinetics Inc. Upgrade Hold Sell
HIMX Himax Technologies Inc. Downgrade Sell Hold
HTLF Heartland Financial USA Inc. Upgrade Buy Hold
LYTS LSI Industries Inc. Downgrade Sell Hold
MNRTA Monmouth Real Estate Investment Downgrade Sell Hold
MOH Molina Healthcare Corp Upgrade Buy Hold
MWE Markwest Energy Partners LP Downgrade Hold Buy
PRO PROS Holdings Inc. Initiated Sell
PVX Provident Energy Trust Downgrade Sell Hold
SCHS School Speciality Inc. Upgrade Buy Hold
SMTS Somanetics Corp Upgrade Buy Hold
SNE Sony Corp Downgrade Hold Buy
SSD Simpson Manufacturing Inc. Upgrade Buy Hold
SSI Stage Stores Inc. Upgrade Buy Hold
UAM Universal American Corp Upgrade Hold Sell
This article was written by a staff member of TheStreet.com Ratings.