Note: Our quantitative model makes stock recommendations based on GAAP 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' reports in conjunction with additional information to construct their opinions on the value that should be placed on any given stock.

The following ratings changes were generated on Wednesday, March 25.

We've downgraded Athenahealth ( ATHN), which provides Internet-based business services for physician practices in the U.S., from hold to sell.

The company reported significant earnings-per-share improvement in the most recent quarter compared with the same quarter a year ago, though we anticipate underperformance relative to its pattern over the past year of positive EPS growth. Athenahealth's gross profit margin of 59.1% has increased from the year-ago quarter, and its 49.7% net profit margin outperformed the industry average. Net operating cash flow increased 71.8% to $6.4 million compared with the year-ago quarter.

Shares have risen over the past year, outperforming the S&P 500 over the same time frame. Looking ahead, the stock's rise over the last year has already helped drive it to a level that is relatively expensive compared to the rest of its industry, implying reduced upside potential.

We've upgraded open-end unincorporated investment trust Baytex Energy Trust ( BTE) from sell to hold. Strengths include the company's EPS growth, growth in net income and return on equity. However, we also find weaknesses including operating cash flow, the performance in the stock itself and debt management.

EPS rose by 10.4% in the most recent quarter compared with the year-ago quarter. Net income increased by 26.7% to $52.4 million, from $41.4 million. Revenue fell by 16.5%. Net operating cash flow declined 1.7% to $98.4 million.

Shares have fallen 43.4% over the past year, apparently dragged down in part by the decline in the S&P 500. 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 upgraded specialty home appliance and consumer electronics retailer Conn's ( CONN) from sell to hold. Strengths include the company's financial position with reasonable debt levels by most measures, reasonable valuation levels and relatively strong performance when compared with the S&P 500 during the past year. However, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Conn's has a deb-to-equity ratio of 0.1, which is higher than the industry average. Its quick ratio of 2 implies that the company is able to cover short-term liquidity needs. Revenue dropped by 5.3% since the year-ago quarter, and EPS decreased. Conn's gross profit margin is 29.5%, a decreased from the year-ago quarter, ad its net profit margin of 4.3% trails the industry average. Net operating cash flow fell to $69.5 million compared with the year-ago quarter.

We've downgraded independent energy company VAALCO Energy ( EGY) from buy to hold. Strengths include its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and notable return on equity. However, we also find weaknesses including unimpressive growth in net income and feeble growth in the company's earnings per share.

VAALCO's debt-to-equity ratio of 0.03 is very low and currently below the industry average, implying successful management of debt levels. Its quick ratio or 2.4 implies that the company is able to cover short-term liquidity needs. Net operating cash flow increased by 90.4% to $41.1 million compared with the year-ago quarter. Return on equity also improved, implying a modest strength in the organization. EPS declined compared with the year-ago quarter, and we feel the company is likely to report a decline in EPS in the coming year. Net income fell to -$7.5 million from $2 million in the year-ago quarter, underperforming the S&P 500 and the oil, gas and consumable fuels industry.

We've upgraded hhgregg ( HGG), a specialty retailer of hone appliances, consumer electronics and mattresses, from sell to hold. Strengths include the company's return on equity, revenue growth and good cash flow from operations. However, we also find weaknesses including generally poor debt management and poor profit margins.

ROE increased compared with the year-ago quarter, outperforming the S&P 500 and the industry average. Revenue increased by 6.6%. The company's 31.4% gross profit margin is lower than desirable, though it has increased from the year-ago period. The 4.1% net profit margin compared favorably with the industry average. The debt-to-equity ratio of 1 is low overall but high compared with the industry average. The 0.2 quick ratio is low and could demonstrate weak liquidity.

Shares have risen over the past year at a faster pace than the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.

All ratings changes generated on March 25 are listed below.

Ticker
Company
Current
Change
Previous
ATHN
AthenaHealth
SELL
Downgrade
HOLD
BTE
Baytex Energy Trust
HOLD
Upgrade
SELL
CONN
Conn's
HOLD
Upgrade
SELL
EGY
Vaalco Energy
HOLD
Downgrade
BUY
GNET
Global Traffic Network
HOLD
Upgrade
SELL
HGG
hhgregg
HOLD
Upgrade
SELL
KGS
Quicksilver Gas Services
SELL
Initiated

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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