The following ratings changes were generated on Monday, Dec. 8.

We've downgraded CapitalSource ( CSE), which provides loans to small and medium-sized businesses, from hold to sell, driven by its generally disappointing historical performance in the stock itself, deteriorating net income, generally weak debt management, disappointing return on equity and feeble growth in its earnings per share.

Net income decreased by 71.5% since the same quarter last year, from $28.3 million to $8.1 million, underperforming both the S&P 500 and the REITs industry. The debt-to-equity ratio is very high at 3.74 and currently higher than the industry average, implying very poor management of debt levels within the company. Current return on equity is lower than its ROE from the same quarter one year prior, a clear sign of weakness within the company, and on the basis of ROE, CapitalSource underperforms both the S&P 500 and the industry.

Earnings per share have declined steeply, by 80%, in the most recent quarter compared with the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years, but the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CapitalSource reported lower earnings of 96 cents vs. $1.66 in the prior year. This year, the market expects an improvement in earnings to $1.25.

Shares are down 74.4% on the year, underperforming the S&P 500. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

We've upgraded IdaCorp ( IDA), which engages in the generation, transmission, distribution, sale and purchase of electric energy in the U.S., from hold to buy, driven by its revenue growth, expanding profit margins, good cash flow from operations, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.

Revenue rose by 14.6% since the same quarter a year ago, outpacing the industry average of 9.8% growth and boosting EPS. Net income is up 78.7%, outperforming both the electric utilities industry and the S&P 500. IdaCorp's gross profit margin of 35.8% is strong, having increased from the same quarter the previous year, and its net profit margin of 17.3% exceeds the industry average. Net operating cash flow has significantly increased by 979.1% to $61.9 million when compared with the same quarter last year. In addition, IdaCorp has also vastly surpassed the industry average cash flow growth rate of 25.23%.

EPS improved significantly in the most recent quarter compared with the same quarter last year. During the past fiscal year, it reported lower earnings of $1.86 vs. $2.34 in the prior year. This year, the market expects an improvement in earnings to $2.25.

We've downgraded integrated poultry processing company Sanderson Farms ( SAFM), from hold to sell, driven by its deteriorating net income, disappointing return on equity and feeble growth in its earnings per share.

Net income decreased by 315.7% since the same quarter a year ago, from $24.07 million to -$51.92 million, underperforming both the S&P 500 and the food products industry. Return on equity also decreased, a signal of major weakness within the corporation. On the basis of ROE, Sanderson significantly underperformed the industry average and the S&P 500. Revenue increased by 7.8%, trailing the industry average growth rate of 35.5%.

EPS declined steeply in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, Sanderson swung to a loss, reporting -$2.14 vs. $3.88 in the prior year. This year, the market expects an improvement in earnings to -7 cents.

Sanderson's share price has not changed much over the past year, due to the relatively weak year-over-year performance of the overall market and the company's stagnant earnings. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

We've downgraded retailer Sears Holdings ( SHLD) from hold to sell, driven by its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and poor profit margins.

EPS are down 3966.66% compared with the year-earlier quarter, and they have declined over the past two years. During the past fiscal year, Sears reported lower earnings of $5.80 vs. $9.62 in the prior year. For the next year, the market is expecting a further contraction of 90.2% in earnings to 57 cents. Net income has decreased by 3750%, from $4 million to -$146 million. Current return on equity is lower than its ROE from the same quarter one year prior, underperforming both the S&P 500 and the industry average. Sears' gross profit margin of 26.8% is low, having decreased from the same quarter last year, and its net profit margin of -1.4% trails the industry average.

Shares are down 58.5% on the year, underperforming the S&P 500. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

We've initiated coverage on specialty retailer Ulta Salon Cosmetics & Fragrance ( ULTA) at sell, driven by its generally disappointing historical performance in the stock itself and poor profit margins.

Ulta's gross profit margin of 31.2% is low, having decreased from the same quarter last year, and its net profit margin of 2% trails the industry average. Its current debt-to-equity ratio, 0.60, is low and is below the industry average, implying successful management of debt levels. The quick ratio, however, of 0.12 is very weak and demonstrates a lack of ability to pay short-term obligations. On the basis of return on equity, Ulta has underperformed the industry average but outperformed the S&P 500.

EPS are up 12.5% in the most recent quarter compared with the same quarter a year ago. This year, the market expects an improvement in earnings to 49 cents from 31 cents. Shares are down 68.1% on the year, underperforming the S&P 500, but the stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

Other ratings changes include Culp ( CFI) and GameTech ( GMTC), both downgraded from hold to sell.

All ratings changes generated on Dec. 8 are listed below.
Ticker Company
Current
Change
Previous
BERK Berkshire Bancorp
SELL
Downgrade
HOLD
CAST ChinaCast Education
HOLD
Upgrade
SELL
CASTU ChinaCast Education
HOLD
Upgrade
SELL
CCFH CCF Holding
SELL
Downgrade
HOLD
CFI Culp
SELL
Downgrade
HOLD
CNTY Century Casinos
SELL
Downgrade
HOLD
CSE CapitalSource
SELL
Downgrade
HOLD
GMTC GameTech International
SELL
Downgrade
HOLD
HSWI HSW International
SELL
Initiated
IDA IdaCorp
BUY
Upgrade
HOLD
ITP Intertape Polymer Group
SELL
Downgrade
HOLD
KINV Kentucky Investors
SELL
Downgrade
HOLD
MLNK ModusLink Global Solutions
SELL
Downgrade
HOLD
MTR Mesa Royalty Trust
HOLD
Downgrade
BUY
RAVN Raven Industries
HOLD
Downgrade
BUY
SAFM Sanderson Farms
SELL
Downgrade
HOLD
SHLD Sears Holdings
SELL
Downgrade
HOLD
SLI SL Industries
SELL
Downgrade
HOLD
STON StoneMor Partners
SELL
Downgrade
HOLD
TGB Taseko Mines
SELL
Downgrade
HOLD
ULTA Ulta Salon
SELL
Initiated
WST West Pharmaceutical Services
HOLD
Downgrade
BUY
WXCO WHX
SELL
Initiated

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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