The following ratings changes were generated on Tuesday, Jan. 20.

We've downgraded Allegiant Travel ( ALGT - Get Report) from buy to hold. Strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, we also find weaknesses including premium valuation, poor profit margins and weak operating cash flow.

Revenue rose by 35.4% since the year-ago quarter, outperforming the industry average of 7.9%, but earnings per share declined. Allegiants' 0.3 debt-to-equity ratio is low and below the industry average, implying successful management of debt levels, and its 1.3 quick ratio illustrates its ability to avoid short-term cash problems. Allegiant's gross profit margin of 18.7% is rather low, having decreased from the same quarter last year, but its net profit margin of 4.2% is above the industry average.

We've downgraded Home Bancshares ( HOMB - Get Report) from buy to hold. Strengths include it solid stock price performance. At the same time, we also find weaknesses including deteriorating net income, disappointing return on equity and premium valuation.

Revenue fell by 14.7% since the year-ago quarter, and EPS decreased sharply. The company has reported a trend of declining EPS over the past few years, but the consensus estimate suggests that this trend should reverse in the coming year. Home Bancshares' gross profit margin of 9% is extremely low, having decreased from the same period last year, and its net profit margin of 25.8% is significantly below the industry average.

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, despite the company's weak earnings results. 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, implying reduced upside potential.

We've upgraded Longtop Financial Technologies ( LFT), which develops softward and frovides IT services to the financial services industry in the People's Republic of China, from sell to hold. Strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, we find that the company's return on equity has been disappointing. 

Revenue rose by 40.8% since the year-ago quarter, boosting EPS. Longtop's debt-to-equity ratio is very low and is currently below that of the industry average, implying very successful management of debt levels, and the company maintains a quick ratio of 5.3, which clearly demonstrates the ability to cover short-term cash needs. Its gross profit margin of 74.5% is currently very high, though it has decreased significantly from the same period last year. Longtop's net profit margin of 50.4% significantly outperformed against the industry. On the basis of return on equity, Longtop underperforms both the software industry and the S&P 500.

We've downgraded Telecomunicacoes de Sao Paulo ( TSP) from buy to hold. Strengths include its attractive valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, we also find weaknesses including deteriorating net income, a decline in the stock price during the past year and feeble growth in the company's earnings per share.

TSP's gross profit margin of 58.5% is rather high, having increased from the same quarter the previous year, and its net profit margin of 14.6% is above the industry average. Its debt-to-equity ratio is very low at 0.3 and is currently below that of the industry average, implying very successful management of debt levels, but its quick ratio of 0.9 is somewhat weak and could be cause for future problems. Net income decreased by 40.1% compared with the same quarter a year ago, to $190.6 million.

Shares plunged 28.7% over the past year, and EPS have sunk by 39.4% compared with the year-earlier quarter, but the performance of the broader market has been even worse. 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 downgraded transportation and logistics company Werner Enterprises ( WERN - Get Report) from buy to hold. Strengths include its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, we also find weaknesses including disappointing return on equity, poor profit margins and a decline in the stock price during the past year.

Revenue rose by 14.5% since the year-ago quarter, outperforming the industry average of 21.9% and boosting EPS. Werner has no debt to speak of, and it has a quick ratio of 1.8, demonstrating its ability to cover short-term liquidity needs. Net operating cash flow has increased to $69 million, or 30.5% when compared with the same quarter last year. The company's current return on equity has slightly decreased from the same quarter one year prior, implying a minor weakness in the organization. Werner's gross profit margin of 13.2% is extremely low, having decreased from the same quarter last year, and its net profit margin of 3.8% significantly trails the industry average.

All ratings changes generated on Jan. 20 are listed below.

Ticker
Company
Current
Change
Previous
ALGT Allegiant Travel
HOLD
Downgrade
BUY
GLDC Golden Enterprises
BUY
Upgrade
HOLD
HOMB Home Bancshares
HOLD
Downgrade
BUY
LFT Longtop Financial
HOLD
Upgrade
SELL
RRST RRSat Global Communications
HOLD
Upgrade
SELL
TSP Telecom Sao Paulo
HOLD
Downgrade
BUY
WERN Werner Enterprises
HOLD
Downgrade
BUY

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.

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