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 September 2.

PetSmart ( PETM) was upgraded from hold to buy. PetSmart provides products, services and solutions for pets in North America. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

The revenue growth came in higher than the industry average of 9.9%. Since the same quarter one year prior, revenue rose by 11.2%. 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, 0.60, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.

The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the specialty retail industry average. The net income has decreased by 20.9% when compared with the same quarter one year ago, dropping from $47.13 million to $37.25 million.

PETM's earnings per share declined by 14.3% in the most-recent quarter compared with the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PETM increased its bottom line by earning $1.95 vs. $1.34 in the prior year. For the next year, the market is expecting a contraction of 23.3% in earnings ($1.50 vs. $1.95).

PETM had been rated a hold since November 20, 2007.

Pico Holdings ( PICO) was upgraded from hold to buy. PICO Holdings, together with its subsidiaries, engages in the ownership and development of real estate properties. It owns land and the related mineral rights and water rights in Nevada.

The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and notable return on equity. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared with such things as earnings and book value.

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the diversified financial services industry. The net income increased by 860.6% when compared with the same quarter one year prior, rising from -$3.71 million to $28.24 million.

Pico's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels.

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. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

Despite the weak revenue results, Pico has outperformed against the industry average of 25.8%. Since the same quarter one year prior, revenue has slightly dropped by 5.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

Pico reported significant earnings per share improvement in the most-recent quartercompared with the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, Pico swung to a loss, reporting -7 cents vs. $2.10 in the prior year.

PICO had been rated a hold since November 12, 2007.

RadioShack ( RSH) has been upgraded from hold to buy. RadioShack engages in the retail sale of consumer electronic goods and services, through its RadioShack store chain and non-RadioShack branded kiosk operations, in the U.S. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

The revenue growth came in higher than the industry average of 9.9%. Since the same quarter one year prior, revenue has slightly increased by 6.4%. 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, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.34, which illustrates the ability to avoid short-term cash problems.

Net operating cash flow has slightly increased to $113.70 million or 6.86% when compared to the same quarter last year. In addition, RSH has also vastly surpassed the industry average cash flow growth rate of -60.56%.

Current return on equity exceeded its return on equity from the same quarter one year prior. This is a clear sign of strength within the company. In comparison with other companies in the specialty retail industry and the overall market on the basis of return on equity, RSH has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.

RSH had been rated a hold since August 29, 2006.

Ship Finance International ( SFL) has been downgraded from buy to hold. Ship Finance International, through its subsidiaries, owns and operates vessels and offshore related assets in Bermuda, Cyprus, Liberia, Norway, Delaware, Singapore and the Marshall Islands. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally poor debt management and weak operating cash flow.

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the oil, gas & consumable fuels industry. The net income increased by 80.5% when compared with the same quarter one year prior, rising from $39.50 million to $71.28 million.

Despite its growing revenue, the company underperformed as compared with the industry average of 29.2%. Since the same quarter one year prior, revenue rose by 25.2%. Growth in the company's revenue appears to have helped boost the earnings per share.

Compared with where it was trading a year ago, SFL'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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.

Net operating cash flow has decreased to $18.33 million or 40.64% 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 debt-to-equity ratio is very high at 3.36 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, SFL maintains a poor quick ratio of 0.85, which illustrates the inability to avoid short-term cash problems.

SFL had been rated a buy since April 10, 2008.

Vimpel-Communications ( VIP) has been downgraded from buy to hold. Open Joint Stock Company Vimpel-Communications, a telecommunications operator, together with its subsidiaries, provides voice and data services through various wireless, fixed and broadband technologies. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has not been very careful in the management of its balance sheet.

VIP's very impressive revenue growth greatly exceeded the industry average of 21.3%. Since the same quarter one year prior, revenue leaped by 52.0%. Growth in the company's revenue appears to have helped boost the earnings per share.

VIP has improved earnings per share by 29.9% 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, VIP has increased its bottom line by earning $1.44 vs. 80 cents in the prior year. This year, the market expects an improvement in earnings ($2.00 vs. $1.44).

The gross profit margin for VIP is currently very high, coming in at 73.20%. Regardless of VIP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VIP's net profit margin of 18.00% compares favorably to the industry average.

Compared with where it was trading a year ago, VIP'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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared with the rest of its industry, implying reduced upside potential.

The debt-to-equity ratio of 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.40, which clearly demonstrates the inability to cover short-term cash needs.

VIP had been rated a buy since Aug. 29, 2006.

Additional ratings changes from September 2 are listed below.
Ticker Company Name Change New Rating Former Rating
AXAS Abraxas Petroleum Downgrade Sell Hold
CCIX Coleman Cable Downgrade Sell Hold
CHDN Churchill Downs Upgrade Buy Hold
CORE Core Mark Holdings Upgrade Buy Hold
GEOY GeoEye Upgrade Buy Hold
GRB Geber Scientific Downgrade Hold Buy
GSI General Steel Holdings Downgrade Hold Buy
HQS HQ Sustainable Martime Industries Downgrade Hold Buy
HW Headwaters Upgrade Hold Sell
KNL Knoll Upgrade Buy Hold
KOP Koppers Holdings Upgrade Hold Sell
LBTYK Liberty Global Upgrade Hold Sell
LNUX SourceForge Downgrade Sell Hold
MED Medifast Upgrade Buy Hold
PEET Peets Coffee & Tea Upgrade Buy Hold
PETM Petsmart Upgrade Buy Hold
PICO PICO Holdings Upgrade Buy Hold
RSH RadioShack Upgrade Buy Hold
SFL Ship Finance International Downgrade Hold Buy
VIP Vimpel-Communications Downgrade Hold Buy

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

More from Investing

60 Seconds: What is the Volcker Rule and How Does it Affect Your Portfolio?

60 Seconds: What is the Volcker Rule and How Does it Affect Your Portfolio?

Video: Here's How Global Stocks Can Boost Your Portfolio

Video: Here's How Global Stocks Can Boost Your Portfolio

Get to Know Stacey Cunningham, the NYSE's First Female Leader in 226 Years

Get to Know Stacey Cunningham, the NYSE's First Female Leader in 226 Years

Pegasystems Founder Explains Why He Has One of the Hottest Tech Stocks Around

Pegasystems Founder Explains Why He Has One of the Hottest Tech Stocks Around

9 Stocks Goldman Sachs Thinks Will Blow Wall Street's Performance Away in 2019

9 Stocks Goldman Sachs Thinks Will Blow Wall Street's Performance Away in 2019