The following ratings changes were generated on Thursday, Jan. 29. We've upgraded managed care organization HealthSpring ( HS) from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings-per-share growth, compelling growth in net income and attractive valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins. Net income increased by 31.3% compared with the year-ago quarter, from $22.4 million to $29.4 million. Revenue rose by 44%, outpacing the industry average of 10.4% growth and helping to boost EPS by 39.5%. The company has demonstrated a pattern of positive earnings per share growth over the past year that we feel should continue. HealthSpring's 0.4 debt-to-equity ratio is low and below the industry average, implying successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.4, which illustrates its ability to avoid short-term cash problems. We've upgraded ITT ( ITT - Get Report), which engages in the design and manufacture of various engineered products and related services, from hold to buy, driven by its robust revenue growth, impressive record of earnings per share growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins. Revenue rose by 32% since the same quarter last year, greatly exceeding the industry average of 1.7% growth and boosting EPS by 20.6%. We feel that the company's two-year pattern of positive EPS growth should continue. Net operating cash flow has increased to $408.2 million, or by 18.8% when compared with the same quarter last year. ITT's debt-to-equity ratio, 0.5, is low and is below the industry average, implying successful management of debt levels, but its quick ratio of 0.7 is somewhat weak and could be cause for future problems.
We've upgraded Pyramid Oil ( PDO), which engages in the exploration, development, and production of crude oil and natural gas, from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in EPS, increase in net income and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Revenue leaped by 71.1% since the same quarter one year ago, and net income rose by 8%, to $710,000 from $650,000. EPS are up 10.3%. Pyramid Oil's gross profit margin is rather high at 66.3%, having increased from the same quarter last year, and its net profit margin of 35.% significantly outperforms the industry average. We've downgraded Symantec ( SYMC - Get Report), which provides software and services that protect, manage and control information risks related to security, data protection, storage, compliance, and systems management, from hold to sell, driven by its deteriorating net income, disappointing return on equity, weak operating cash flow and decline in the stock price during the past year. Net income decreased to -$6,806.3 million from $131.9 million since the same quarter last year, significantly underperforming the S&P 500 and the software industry. Return on equity also great decreased, a signal of major weakness. Net operating cash flow fell 13.1%. Symantec's debt-to-equity ratio of 0.5 is low but it still higher than that of the industry average, and its quick ratio of 0.7 is weak. Shares are down 13.2% over the year, partly due to the market's overall decline. The fact that the stock has come down in price over the past year could be one of the factors that may help make the stock attractive down the road, but right now, we believe that it is too soon to buy. We've downgraded Websense ( WBSN), which develops and markets Web-filtering solutions that help organizations in managing their networks and computing resources, from hold to sell, driven by its disappointing return on equity, poor profit margins and generally weak debt management. ROE has decreased since the year-ago quarter, a sign of weakness within the company, but revenue fell only 0.2% compared with the industry average of a 14.9% decline. Websense's 6% gross profit margin is extremely low, having decreased significantly from the same period last year, and its net profit margin of -13.9% is significantly below the industry average. The company's debt-to-equity ratio of 0.7 is somewhat low overall, but it is high when compared with the industry average. The 0.5 quick ratio is low and demonstrates weak liquidity. Shares are down 24.7% on the year, reflecting, in part, the market's overall decline. 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. Other ratings changes include InterOil ( IOC) and Golar LNG ( GLNG - Get Report), both up-graded from sell to hold. All ratings changes generated on Jan. 29 are listed below.
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.