The following ratings changes were generated on Wednesday, Dec. 3.

We've downgraded Canadian National Railway ( CNI) from buy to hold. Strengths include its impressive record of earnings-per-share growth, increase in net income and revenue growth. However, as a counter to these strengths, we find that the stock has had a decline in price during the past year.

Canadian National Railway has improved earnings per share by 20.8% 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, it increased its bottom line by earning $4.28 vs. $3.90 in the prior year. Net income growth of 13.8% from the same quarter one year ago has greatly exceeded that of the S&P 500 but is less than that of the road and rail industry average. The debt-to-equity ratio is somewhat low, currently at 0.65, and is less than that of the industry average, implying a relatively successful effort in the management of debt levels. The quick ratio, however, which is currently 0.53, displays a potential problem in covering short-term cash needs.

Canadian National Railway's gross profit margin of 45.2% is strong, though it has decreased from the same period last year. Net profit margin of 24.5% compares favorably with the industry average. Shares are off 33% on the yea, but that was actually not as bad as the broader market plunge during that same time frame. One factor that may have helped cushion the fall somewhat is the improvement in the company's earnings per share. In one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry, but due to other concerns, we feel the stock is still not a good buy right now.

We've upgraded Epiq Systems ( EPIQ), which provides integrated technology solutions for legal profession in the U.S., from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, impressive record of earnings per share growth and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Revenue rose by 31.3% since the same quarter last year, outpacing the industry average of 7.1% growth and boosting EPS. Although Epiq's debt-to-equity ratio of 0.20 is very low, it is currently higher than that of the industry average, and its quick ratio of 2.07 demonstrates the ability of the company to cover short-term liquidity needs. Net income growth of 64.8% from the same quarter one year ago has significantly exceeded that of the S&P 500 and the software industry.

Epiq has improved earnings per share by 42.9% in the most recent quarter compared with the same quarter a year ago. This company has reported somewhat volatile earnings recently, but we feel it is poised for EPS growth in the coming year. During the past fiscal year, it reported lower earnings of 21 cents vs. $1.01 in the prior year. This year, the market expects an improvement in earnings to 59 cents. Epiq's gross profit margin is rather high at 53.4%, but it has decreased significantly from the same period last year. The company's net profit margin of 6.8% is significantly lower than it was in the same period last year.

We've downgraded PriceSmart ( PSMT), which engages in the ownership and operation of membership shopping warehouse clubs, from buy to hold. Strengths include its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.

Revenue rose by 26.9% since the same quarter last year, outpacing the industry average of 16.8% growth and boosting EPS significantly 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, it increased its bottom line by earning $1.31 vs. 43 cents in the prior year. PriceSmart's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.38 is very weak and demonstrates a lack of ability to pay short-term obligations.

PriceSmart's gross profit margin of 17.9% is rather low, having decreased from the same quarter the previous year. The net profit margin, however, of 3.90% is above that of the industry average. Shares are down 58.2% on the year, underperforming the S&P 500. 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.

We've downgraded Sina ( SINA), which operates as an online media company and information services provider in the People's Republic of China, from buy to hold. Strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Revenue leaped by an impressive 63.8% since the same quarter one year ago, exceeding the industry average of 30.2% growth and boosting EPS. Although Sina's debt-to-equity ratio of 0.17 is very low, it is currently higher than that of the industry average. The company maintains a quick ratio of 3.29, which clearly demonstrates the ability to cover short-term cash needs. The return on equity has improved slightly when compared with the same quarter one year prior, which can be construed as a modest strength in the organization. On the basis of return on equity, Sina has underperformed the Internet software and services industry average but outperformed the S&P 500. Sina's gross profit margin is rather high at 56.70%, though it has managed to decreased since last year. The 20.8% net profit margin trails the industry average.

Shares are down 45.8% on the year, apparently dragged down by the decline we have seen in the S&P 500. In one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

We've upgraded WGL Holdings ( WGL), which engages in the delivery and sale of natural gas, and provides energy-related products and services, from hold to buy, driven by its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

WGL's net income growth of 17.6% from the same quarter one year ago has greatly exceeded that of the S&P 500 but is less than the gas utilities industry average. Revenue growth of 20.3% trails the industry average of 33.4% but does appear to have boosted EPS. The debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying a relatively successful effort in the management of debt levels. However, the quick ratio of 0.28 is very weak and demonstrates a lack of ability to pay short-term obligations. The return on equity has improved slightly when compared to the same quarter one year prior, which can be construed as a modest strength in the organization. On the basis of ROE, WGL underperformed the industry average but outperformed the S&P 500.

Compared with a year ago, WGL's share price has not changed very much due to the relatively weak year-over-year performance of the overall market and the company's stagnant earnings. 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 despite the fact that it has already risen in the past year.

Other ratings changes include Design Within Reach ( DWRI) and BioScrip ( BIOS), both downgraded from hold to sell.

All ratings changes generated on Dec. 3 are listed below.
Ticker Company
Current
Change
Previous
AFFM Affirmative Insurance
SELL
Downgrade
HOLD
BIOS BioScrip
SELL
Downgrade
HOLD
CNI Canadian National Railway
HOLD
Downgrade
BUY
CTO Consolidated Tomoka Land
SELL
Downgrade
HOLD
DWRI Design Within Reach
SELL
Downgrade
HOLD
EPIQ Epiq Systems
BUY
Upgrade
HOLD
OVTI Omnivision Technologies
SELL
Downgrade
HOLD
PBR.A Petrobras
HOLD
Downgrade
BUY
PSMT PriceSmart
HOLD
Downgrade
BUY
SCOP Scopus Video Networks
SELL
Downgrade
HOLD
SINA Sina
HOLD
Downgrade
BUY
WGL WGL Holdings
BUY
Upgrade
HOLD

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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