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 Friday, March 27.

We've upgraded CyberSource ( CYBS), which provides electronic payment and risk management solutions to enterprise and small business merchants, from hold to buy. This rating is driven by the largely solid financial position with reasonable debt levels by most measures, robust revenue growth, impressive record of earnings per share growth, compelling growth 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.

CyberSource's quick ratio of 2.5 implies strong liquidity. Revenue rose by 37% since the same quarter a year ago, compared with the industry average of 15% growth. Earnings per share also improved compared with the year-ago quarter. Net income increased by 746%, from $1.2 million in the year-ago quarter to $10 million in the most recent quarter. The 16.1% net profit margin is above the industry average, and the 65.7% gross profit margin has increased from the year-ago quarter.

We've downgraded diversified financial services holding company Fifth Third Bancorp ( FITB) from hold to sell, driven by its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Net income fell from $17 million in the year-ago quarter to -$2.1 billion in the most recent quarter. Return on equity also decreased, implying weakness in the corporation. EPS declined compared with the same quarter last year, though the consensus estimate suggests that the company's two-year trend of declining EPS should reverse in the coming year. Net operating cash flow fell to $79 million.

Shares have tumbled by 89.3% over the past year, underperforming the S&P 500. The stock's decline should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

We've downgraded Cedar Fair ( FUN), which owns and operates amusement and water parks, from hold to sell. This rating is driven by the company's generally disappointing historical performance in the stock itself, unimpressive growth in net income, generally weak debt management, weak operating cash flow and poor profit margins.

Net income fell from -$9 million in the year-ago quarter to -$56.8 million in the most recent quarter. The 16.2 debt-to-equity ratio is above the industry average, and the 0.2 quick ratio implies that the company might have difficulty covering short-term cash needs. Net operating cash flow fell to -$33.6 million. Cedar Fair's gross profit margin of 31.3% is lower than desirable, but it has increased from the year-ago quarter. The net profit margin of -47.6% underperformed the industry average.

Shares have fallen 57.4% over the past year, underperforming the S&P 500, and EPS are also down compared with the year-earlier quarter. 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 Sherwin-Williams ( SHW), which engages in the development, manufacture, distribution, and sale of paints, coatings and related products, from buy to hold. Strengths include the expanding profit margins, notable return on equity and solid stock price performance. However, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally poor debt management.

The company's 48.3% gross profit margin has increased from the year-ago quarter, and the 3% net profit margin is above the industry average. Revenue fell 8.3% since the same quarter last year, and EPS decreased 47.5% compared with the year-ago quarter. The 0.5 debt-to-equity ratio is still higher than the industry average. The quick ratio of 0.4 is low and might imply weak liquidity.

We've upgraded CNA Surety ( SUR), which provides surety and surety-related products, from hold to buy. This rating is driven by the company's revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Revenue increased by 5.1% since the same quarter a year ago, and EPS also rose. The debt-to-equity ratio of 0.04 is below the industry average, implying successful management of debt levels. ROE has improved slightly compared with the same quarter last year. The 36.1% gross profit margin has increased from the year-ago quarter, and the 23.9% net profit margin outperformed the industry average.

In part powered by its strong earnings growth of 34.7%, the stock surged by 26.8% over the past year, outperforming the S&P 500. Although almost any stock can fall in a broad market decline, CNA Surety should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

Other ratings changes included National Health Investors ( NHI), upgraded from hold to buy, and W Holding ( WHI), downgraded from hold to sell.

All ratings changes generated on March 27 are listed below.

 
Ticker
Company
Current
Change
Previous
ARYX
ARYx Therapeutics
SELL
Initiated
 
ASFI
Asta Funding
SELL
Downgrade
HOLD
CABL
China Cablecom Holdings
SELL
Initiated
 
CABLU China Cablecom Holdings SELL Initiated  
CYBS CyberSource BUY Upgrade HOLD
FBNC First Bancorp HOLD Downgrade BUY
FITB Fifth Third Bancorp SELL Downgrade HOLD
FUN Cedar Fair SELL Downgrade HOLD
KONG Kongzhong HOLD Upgrade SELL
LL Lumber Liquidators HOLD Upgrade SELL
NHI National Health Investors BUY Upgrade HOLD
PMTI Palomar Medical Technologies SELL Downgrade HOLD
SAIA Saia HOLD Upgrade SELL
SATS EchoStar SELL Initiated  
SCEY Sun Cal Energy SELL Initiated  
SHW Sherwin-Williams HOLD Downgrade BUY
SUR CNA Surety BUY Upgrade HOLD
UTIW UTI Worldwide SELL Downgrade HOLD
WHI W Holding 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.

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