TSC Ratings' Updates: LDK Solar

The following ratings changes were generated on Monday, Oct. 13.

We've downgraded Target ( TGT), which operates large-format general merchandise discount stores in the U.S. and a much smaller, rapidly growing online business, from buy to hold. company's Weaknesses include generally poor debt management, poor profit margins and a generally disappointing performance in the stock itself.

Since the same quarter one year prior, revenues slightly increased by 5.8%, slightly outpacing the industry average of 4.6% and boosting EPS. Target's return on equity has also improved s lightly on the year, outperforming the multiline retail industry and the S&P 500. EPS improved from $3.21 to $3.34, and the market expects further improvement to $3.36 this year.

Target's gross profit margin is currently lower than desirable, at 33.4%, a decrease from the same quarter last year. However, at 4.1%, net profit margin is higher than the industry average. The debt-to-equity ratio of 1.46 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, Target maintains a poor quick ratio of 0.84, which illustrates the inability to avoid short-term cash problems.

We're downgraded Pride International ( PDE), which provides contract drilling and related services, from buy to hold. Strengths include its impressive record of earnings per share growth,compelling growth in net income and revenue growth. Weaknesses include weak operating cash flow and a generally disappointing performance in the stock itself.

EPS improved by 27.9% in the most recent quarter compared with the same quarter a year ago, continuing a two-year pattern of EPS growth and suggesting an improvement in business performance. Pride earned $2.45 this year, compared with $1.11 in the prior year, and the market expects earnings of $3.65 this year. Pride's net income growth of 24.8%, from $146.1 million to $187.6 million, exceeds that of the S&P 500 and the energy equipment and services industry average. ROE has improved slightly year over year, outperforming the S&P 500 but underperforming the industry average.

Net operating cash flow has decreased to $165.60 million, or 12.56%, when compared with the same quarter last year. In addition, when comparing the cash generation rate with the industry average, the firm's growth is significantly lower. Shares have fallen 58.26% on the year, underperforming the S&P 500. This decline could help make the stock attractive down the road, but we believe that it is too soon to buy now.

We've downgraded Toronto-Dominion Bank ( TD), which offers a full range of financial products and services to approximately 13 million customers in Canada and worldwide, from buy to hold. Strengths include revenue growth, good cash flow from operations andexpanding profit margins. Weaknesses include a decline in the stock price during the past year and feeble growth in the company's earnings per share.

The company's 6.3% increase in revenues was below the industry average of 9.5%. Revenue does not appear to have trickled down to the company's bottom line, and EPS have declined by 19.9% in the most recent quarter compared with the same quarter a year ago, to $5.47 from $6.34. The company has suffered a declining EPS over the past two years.

Net operating cash flow has significantly increased by 478.54% to $10,796.00 million when compared with the same quarter last year. Toronto-Dominion has also vastly surpassed the industry average cash flow growth rate of 336.43%.

Gross profit margin is rather high at 65%, though it has decreased from the same period last year. At 14.8%, net profit margin compares favorably with the industry average. Shares have plunged 40.4% over the past year, probably driven by the decline of similar magnitude in the overall market, as well as by lower EPS compared with the same quarter one year earlier. But don't assume that the stock can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, TD is still more expensive than most of the other companies in its industry.

We've downgraded steel manufacturer Steel Dynamics ( STLD) from buy to hold. Strengths include robust revenue growth, impressive record of EPS growth and compelling growth in net income. Weaknesses include generally poor debt management, poor profit margins and a generally disappointing performance in the stock itself.

Steel Dynamics' revenues leaped 163.8% over the same quarter one year prior, greatly exceeding the industry average of 40.7%. The company has demonstrated a pattern of positive EPS over the past two years that we feel should continue During the past fiscal year, EPS improved from $1.88 to $2.01, and the market expects further improvement to $3.85 this year..

Steel Dynamics' gross profit margin is rather low at 21.6%, having decreased from the same quarter the previous year. Net profit margin, at 8.8%, significantly trails the industry average. 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. Steel Dynamics poor quick ratio of 0.97, which illustrates the inability to avoid short-term cash problems.

We've downgraded Chinese solar wafer company LDK Solar ( LDK) from hold to sell based on its generally weak debt management and poor profit margins.

The 1.25 debt-to-equity ratio 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 0.44, which clearly demonstrates an inability to cover short-term cash needs. LDK's gross profit margin is lower than desirable, at 25.4%, having decreased from the same quarter last year. Net profit margin of 33.9%, though, has significantly outperformed against the industry average. Shares are down 59.3% on the year, underperforming the S&P 500.

LDK reported significant EPS improvement in the most recent quarter compared with the same quarter a year ago. This year, the market expects further improvement, from $1.12 to $3.14. Net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the semiconductors and semiconductor equipment industry. Net income increased by 420.2%, from $28.75 million to $149.53 million.

Other ratings changes include Syms ( SYMS) and Libbey ( LBY), both of which we downgraded from hold to sell.

All ratings changes generated on Oct. 13 are listed below.
Ticker Company Current Change Previous
APOG Apogee Enterprises HOLD Downgrade BUY
APU AmeriGas Partners HOLD Downgrade BUY
ARTW Art's-Way Manufacturing HOLD Downgrade BUY
ATE Advantest SELL Downgrade HOLD
BBOX Black Box HOLD Downgrade BUY
BDC Belden HOLD Downgrade BUY
BEN Franklin Resources HOLD Downgrade BUY
BTE Baytex Energy Trust SELL Downgrade HOLD
CCFB CCSB Financial SELL Downgrade HOLD
CDI CDI HOLD Downgrade BUY
DTE DTE Energy HOLD Downgrade BUY
DUCK Duckwall-Alco Stores HOLD Upgrade SELL
DWSN Dawson Geophysical HOLD Downgrade BUY
GASS StealthGas HOLD Downgrade BUY
GIL Gildan Activewear HOLD Downgrade BUY
GTLS Chart Industries HOLD Downgrade BUY
IART Integra LifeSciences HOLD Downgrade BUY
IKNX Ikonics HOLD Downgrade BUY
INLM International Monetary Systems SELL Downgrade HOLD
LBY LIbbey SELL Downgrade HOLD
LDK LDK Solar SELL Downgrade HOLD
LIMS Starlims Technologies SELL Downgrade HOLD
MDF Metropolitan Health Networks HOLD Downgrade BUY
MLNK ModusLink Global Solutions HOLD Upgrade SELL
NBG National Bank of Greece HOLD Downgrade BUY
NSH NuStar GP Holdings SELL Downgrade HOLD
OKE Oneok HOLD Downgrade BUY
PDE Pride International HOLD Downgrade BUY
PKD Parker Drilling HOLD Downgrade BUY
PKE Park Electrochemical HOLD Downgrade BUY
PLXS Plexus HOLD Downgrade BUY
PMTC Parametric Technology HOLD Downgrade BUY
POL Polyone HOLD Downgrade BUY
PPD Pre-Paid Legal Services HOLD Downgrade BUY
PRU Prudential Financial HOLD Downgrade BUY
QGEN Qiagen HOLD Downgrade BUY
SERV Servidyne SELL Downgrade HOLD
SPN Superior Energy Services HOLD Downgrade BUY
STLD Steel Dynamics HOLD Downgrade BUY
STO StatoilHydro HOLD Downgrade BUY
SWK Stanley Works HOLD Downgrade BUY
SYMS Syms SELL Downgrade HOLD
SYUT Synutra International HOLD Downgrade BUY
TAP.A Molson Coors Brewing HOLD Downgrade BUY
TD Toronto Dominion HOLD Downgrade BUY
TGT Target HOLD Downgrade BUY
UNT Unit HOLD Downgrade BUY
VARI Varian HOLD Downgrade BUY
VRGY Verigy SELL Downgrade HOLD
WPI Watson Pharmaceuticals HOLD Downgrade BUY
Source: INSERT SOURCE

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.

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

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