TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

The following ratings changes were generated on Friday, May 15.

We've downgraded Avery Dennison ( AVY) from hold to sell, driven by its feeble growth in its earnings per share, deteriorating net income, generally weak debt management, disappointing return on equity and poor profit margins.

Avery's 1.8 debt-to-equity ratio is high compared with the industry average, and the company has a quick ratio of 0.5. Its return on equity has decreased from the year-ago quarter, as has its 28.3% gross profit margin. Net profit margin of -64% is below the industry average. Net operating cash flow fell 71.4% to $16 million compared with the same quarter last year, and EPS also declined. EPS have declined over the past two years, a trend we anticipate to continue.

We've upgraded Bemis ( BMS) from hold to buy, driven by its good cash flow from operations, notable return on equity and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Net operating cash flow increased 166.8% to $148.3 million compared with the same quarter last year. ROE has improved, and revenue fell by 11%. EPS also decreased. Bemis' debt-to-equity ratio of 0.5 is above the industry average. Its quick ratio is 1.1. Net income decreased by 13.3% from the year-ago quarter, from $42.3 million to $36.7 million.

We've upgraded Seacor Holdings ( CKH) from hold to buy, driven by its revenue growth, attractive valuation levels, increase in net income, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Revenue rose by 12.7% since the same quarter a year ago, and EPS also increased. Net income rose 44.6%, from $36.7 million to $53 million. Net operating cash flow increased by 67.3% to $99.2 million. Seacor's 37.8% gross profit margin has increased from the year-ago quarter, though its net profit margin of 13.3% trails the industry average.

We've downgraded China Nepstar ( NPD) from hold to sell, driven by its feeble growth in its earnings per share.

Net income fell 19% compared with the year-ago quarter, from $8.4 million to $6.8 million. EPS declined 25% in the most recent quarter compared with the year-ago quarter, and we feel that the company is likely to report a decline in EPS in the coming year. China Nepstar's gross profit margin is 45.6%, though it was decreased from the year-ago quarter. Its 7% net profit margin compared favorably with the industry average. The company improved its net operating cash flow to $1 million, from having none in the year-ago quarter.

Shares have tumbled 57.1% over the past year, underperforming the S&P 500.

We've upgraded XTO Energy ( XTO) from hold to buy, driven by its robust revenue growth, expanding profit margins, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Revenue rose by 29.3% compared with the year-ago quarter, though EPS declined. XTO's gross profit margin of 79.4% has increased from the year-ago quarter, and net profit margin of 22.5% significantly outperformed the industry average. Net operating cash flow increased by 259.7% to $3.4 billion compared with the year-ago quarter, and net income increased by 4.5%, from $456 million to $486 million. EPS declined by 9.8% in the most recent quarter compared with the same quarter last year, and we feel the company is likely to report a decline in EPS in the coming year.

Ticker
Company
Current
Change
Previous
AHCI Allied Healthcare International HOLD Upgrade SELL
ATSI ATS Medical HOLD Upgrade SELL
AVAV Aerovironment HOLD Downgrade BUY
AVY Avery Dennison SELL Downgrade HOLD
BLSW Bridgeline Software HOLD Upgrade SELL
BMS Bemis BUY Upgrade HOLD
CKH Seacor Holdings BUY Upgrade HOLD
CNQR Concur Technologies BUY Upgrade HOLD
CWSI China Wind Systems SELL Initiated  
ENSG Ensign Group SELL Downgrade HOLD
ESA Energy Services of America SELL Initiated  
GRMH Graymark Healthcare SELL Initiated  
HRP HRPT Properties Trust HOLD Upgrade SELL
HTCO Hickory Tech BUY Upgrade HOLD
IM Ingram Micro HOLD Upgrade SELL
JCG J. Crew Group HOLD Upgrade SELL
NFP National Financial Partners SELL Downgrade HOLD
NPD China Nepstar SELL Downgrade HOLD
NSATF Norsat International HOLD Upgrade SELL
PBH Prestige Brands Holdings SELL Downgrade HOLD
PM Philip Morris International HOLD Upgrade SELL
PWRD Perfect World HOLD Upgrade SELL
PWVI PowerVerde SELL Downgrade HOLD
SCR Simcere Pharmaceutical HOLD Upgrade SELL
TCX Tucows HOLD Upgrade SELL
WEDC White Electronic Designs BUY Upgrade HOLD
WRC Warnaco Group HOLD Downgrade BUY
XTO XTO Energy BUY Upgrade HOLD

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.

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