The following ratings changes were generated on Thursday, Dec. 18.

We've upgraded specialty insurance company Allied World Assurance ( AWH) from sell to hold. Strengths include its largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, we also find weaknesses including deteriorating net income, weak operating cash flow and a decline in the stock price during the past year.

Allied World's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying very successful management of debt levels. Revenue fell by 44.6% since the same quarter a year ago, decreasing EPS. Net income decreased to -$46.4 million from $108.96 million, underperforming the S&P 500 and the insurance industry. Net operating cash flow decreased to $133.3 million, or 42%.

The company has experienced a steep decline in earnings per share in the most recent quarter compared with its performance from the same quarter a year age. However, during the past fiscal year, Allied World increased its bottom line by earning $7.52 vs. $5.71 in the prior year, and this year, the market expects further improvement in earnings to $8.

We've upgraded Cantel Medical ( CMN) from hold to buy, driven by its impressive record of earnings per share growth, compelling growth in net income, revenue growth, good cash flow from operations and expanding profit margins.

Net income rose 71.9% compared with the same quarter last year, to $3.3 million, outperforming the S&P 500 and the health care equipment and supplies industry. Revenue increased by 7.3%, boosting EPS but underperforming the industry average. Net operating cash flow increased by 445.1% to %5.4 million, surpassing the industry average cash flow growth rate of 21.5%. Cantel's 41.4% gross profit margin is strong, having increased from the same quarter last year, but its net profit margin of 5.2% trails the industry average.

Cantel reported significant EPS improvement in the most recent quarter compared with the same quarter last year. During the past fiscal year, the company increased its bottom line by earning 53 cents versus 51 cents in the prior year. This year, the market expects further improvement in earnings to 78 cents.

We've upgraded financial services company Life Partners Holdings ( LPHI) from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income.

Revenue rose by 44.3% since the same quarter last year, boosting EPS. Life Partners' debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying very successful management of debt levels. The company also maintains a quick ratio of 4.4, which clearly demonstrates its ability to cover short-term cash needs. Net income growth of 39.6% significantly exceeded that of the S&P 500 and the diversified financial services industry.

EPS rose by 38.6% in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, the company increased its bottom line by earning $1.57 vs. 28 cents in the prior year, and this year, the market expects an improvement in earnings to $2.27. Shares are up 26.5% on the year, outperforming the S&P 500, and although almost any stock can fall in a broad market decline, this stock should continue to move higher.

We've downgraded semiconductor manufacturer Microsemi ( MSCC) from buy to hold. Strengths include its revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, we find that the stock has had a decline in price during the past year.

Revenue rose by 12.5% since the same quarter last year, outpacing the industry average of 7.5% and boosting EPS. Microsemi's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying very successful management of debt levels. The company maintains a quick ratio of 4.1, which clearly demonstrates the ability to cover short-term cash needs. Its gross profit margin of 56.2% is rather high, having increased from the same quarter the previous year, but the net profit margin of 12.8% trails the industry average. Current return on equity exceeded its ROE from the same quarter one year prior, a clear sign ofstrength within the company.

Shares are down 34.6% on the year, apparently dragged down by the decline we have seen in the S&P 500, but don't assume that it can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, Microsemi is still more expensive than most of the other companies in its industry.

We've downgraded Spartech ( SEH), an an intermediary processor of engineered thermoplastics, from hold to sell, driven by its deteriorating net income, generally weak debt management, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Net income decreased to -$197.4 million from $1.3 million in the same quarter a year ago, significantly underperforming the S&P 500 and the chemicals industry. The debt-to-equity ratio of 1.2 is relatively high when compared with the industry average, suggesting a need for better debt level management, and Spartech maintains a poor quick ratio of 0.9, illustrating an inability to avoid short-term cash problems. Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior, a signal of major weakness within the corporation. Spartech's gross profit margin is currently extremely low at 8.8%, having decreased from the same quarter last year, and its net profit margin of -57% is significantly below that of the industry average.

Shares are down 47.7% on the year, underperforming the S&P 500, and EPS are down 16,375% compared with the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor, and 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.

All ratings changes generated on Dec. 18 are listed below.

Ticker Company Current Change Change
AWH Allied World Assurance HOLD Upgrade SELL
CMN Cantel Medical BUY Upgrade HOLD
ESIC EasyLink Services SELL Downgrade HOLD
KSW KSW INC HOLD Downgrade BUY
LPHI Life Partners Holdings BUY Upgrade HOLD
MSCC Microsemi HOLD Downgrade BUY
SEH Spartech SELL Downgrade HOLD
SWWC Southwest Water SELL Downgrade 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.

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