The following ratings changes were generated on Monday, March 16.

We've downgraded Cogent ( COGT), which provides automated fingerprint identification systems and other fingerprint biometrics solutions to governments, law enforcement agencies, and other organizations worldwide, from buy to hold. Strengths include company's its robust revenue growth, compelling growth in net income and good cash flow from operations. However, we find that the stock itself is trading at a premium valuation.

Revenue leaped by 82.8% since the same quarter last year, greatly exceeding the industry average of 10.1% growth. Net income rose 49.3%, from $7.7 million to $11.5 million, significantly outperforming the S&P 500 and the electronic equipment, instruments and components industry. Cogent's 57.4% gross profit margin is rather high, though it has decreased significantly from the same period last year. EPS improved significantly compared with the year-ago quarter, but we anticipate underperformance in the coming year relative to the company's two-year pattern of positive EPS growth.

We've downgraded East West Bancorp ( EWBC), which operates as the holding company for East West Bank, from hold to sell, driven by its disappointing return on equity, poor profit margins, weak operating cash flow, generally disappointing historical performance in the stock itself and deteriorating net income.

Return on equity has greatly decreased compared with the same quarter a year ago, a signal of major weakness within the corporation. The 22.1% gross profit margin is rather low, having decreased significantly from the year-ago period. Net operating cash flow fell 39.3% to $38.1 million, compared with the year-ago quarter. Net income decreased by 93.6%, from $37.3 million to $2.4 million.

Shares have tumbled by 72.8% over the past year, underperforming the S&P 500, and EPS are down 108.5% compared with the year-ago 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.

We've downgraded National HealthCare ( NHC), which operates long-term health care centers with associated assisted living centers and independent living centers, from buy to hold. Strengths 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 a decline in the stock price during the past year, deteriorating net income and disappointing return on equity.

Revenue increased slightly, by 7.7%, since the year-ago quarter, compared with the industry average of 6.5% growth. The 0.1 debt-to-equity ratio is very low and below the industry average, implying very successful management of debt levels. The 1.2 quick ratio is adequate, illustrating the company's ability to avoid short-term cash problems. Net operating cash flow increased slightly, by 1.3%, to $11.6 million, compared with the year-ago quarter. Net income decreased by 63.1%, from $13.4 million to $4.9 million, significantly underperforming the S&P 500 and the health care providers and services industry. ROE slightly decreased, implying a minor weakness.

We've downgraded Prudential Financial ( PRU), which provides various financial products and services in the U.S., Asia, Europe and Latin America, 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 fell from $871 million in the year-ago quarter to -$1.6 billion in the most recent quarter, significantly underperforming the S&P 500 and the insurance industry. The 2.9 debt-to-equity ratio is very high and above the industry average, implying very poor management of debt levels. ROE has greatly decreased compared with the same quarter last year, a signal of major weakness. The 18% gross profit margin is rather low, having decreased significantly from the same period last year, and the net profit margin of 22.5% is significantly below the industry average.

Shares are down 73.5% over the past year, underperforming the S&P 500, and EPS are down 326% compared with the year-ago 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.

We've downgraded orthopedic medical device company Wright Medical Group ( WMGI) from hold to sell, driven by its generally disappointing historical performance in the stock itself, unimpressive growth in net income and weak operating cash flow.

Net income fell from $1.4 million in the year-ago quarter to -$2.7 million in the most recent quarter, significantly underperforming the S&P 500 and the health care equipment and supplies industry. Net operating cash flow fell to -$12.9 million. ROE improved slightly, which can be construed as a modest strength in the organization. Wright's 76.7% gross profit margin is very high, though it has decreased from the year-ago period. Its net profit margin of -2.2%, however, significantly underperformed the industry average.

Shares have tumbled 47.7% over the past year, underperforming the S&P 500, and EPS are down 275% compared with the year-ago quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, Wright is still more expensive than most of the other companies in its industry.

All ratings changes generated on March 16 are listed below.

 
Ticker
Company
Current
Change
Previous
ADG
Allied Defense Group
SELL
Downgrade
HOLD
BBGI
Beasley Broadcast Group
SELL
Downgrade
HOLD
COGT
Cogent
HOLD
Downgrade
BUY
EWBC
East West Bancorp
SELL
Downgrade
HOLD
JAX
J. Alexander's
SELL
Downgrade
HOLD
NHC
National Healthcare
HOLD
Downgrade
BUY
PRU
Prudential Financial
SELL
Downgrade
HOLD
QADI
QAD
SELL
Downgrade
HOLD
WILC
G Willi Food
SELL
Downgrade
HOLD
WMGI
Wright Medical Group
SELL
Downgrade
HOLD
SOURCE:

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