The following ratings changes were generated on Thursday, March 19.

We've upgraded Retalix ( RTLX), which provides integrated enterprise-wide software solutions, from sell to hold. Strengths include the company's impressive record of earnings per share growth, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, we find that the stock has had a generally disappointing performance in the past year.

Retalix reported significant earnings-per-share improvement in the most recent quarter compared withthe same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year that we feel should continue, suggesting that the performance of thebusiness is improving. Net income rose from -$1.7 million in the year-ago quarter to $2 million in the most recent quarter, significantly exceeding the net income growth of the S&P 500 and the software industry. Revenue dropped by 5.4%, but the company still outperformed the industry average of 7.5% growth. Return on equity improved slightly, which can be construed as a modest strength in the organization.

Shares have plunged by 41.5% over the past year, dragged down in part by the decline in 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 downgraded Sun Healthcare Group ( SUNH), which provides nursing, rehabilitative and related specialty health care services, from buy to hold. Strengths include the company's revenue growth, notable return on equity and attractive valuation levels. However, we find that the company has not been very careful in the management of its balance sheet.

Revenue increased by 5.5% since the same quarter last year, helping to boost EPS. ROE also rose, a clear sign of strength within the company. Sun Healthcare's gross profit margin of 15.8% is rather low, though it has increased from the year-ago period. Its net profit margin of 17.7% significantly outperformed the industry average. The 1.8 debt-to-equity ratio is quite high overall and compared with the industry average, but its quick ratio is somewhat strong at 1.4, demonstrating the company's ability to handle short-term liquidity needs.

Shares are off by a sharp 26.5% compared with a year ago, though the decline was not as bas as the broader market's plunge during the same time frame. 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 United Online ( UNTD), which provides consumer products and services over the Internet, from hold to sell. This rating is driven by the company's deteriorating net income, generally weak debt management, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Net income fell from $14.6 million in the year-ago quarter to -$137.6 million, significantly underperforming the S&P 500 and the Internet software and services industry. The 1.2 debt-to-equity ratio is relatively high compared with the industry average, suggesting a need for better debt-level management. Its 0.7 quick ratio demonstrates its lack of ability to cover short-term liquidity needs. ROE greatly decreased compared with the year-ago quarter, a signal of major weakness.

Shares have tumbled by 60.7% over the past year, underperforming the S&P 500, and EPS are down 900% 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 March 18 are listed below.

 
Ticker
Company
Current
Change
Previous
BPMA
Applied Spectrum
SELL
Initiated
BTEL
BioTel
HOLD
Initiated
CGA
Discovery Technologies
SELL
Initiated
IHO
Invitel Holdings
SELL
Initiated
RTLX
Retalix
HOLD
Upgrade
SELL
SUNH
Sun Healthcare Group
HOLD
Downgrade
BUY
UNTD
United Online
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.

Our quantitative model makes stock recommendations based on GAAP (generally accepted accounting principles) figures that may differ materially from data as reported by the companies themselves. As a result, rating changes are occasionally driven by so-called nonrecurring items. As always, we urge readers to use TSC Ratings in conjunction with additional information to construct their opinions on the value that should be placed on any given stock.

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