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 Monday, May 26.

We've downgraded ASM International ( ASMI) from hold to sell, driven by its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and weak operating cash flow.

ASM experienced a steep decline in earnings per share in the most recent quarter compared with the year-ago quarter, and we anticipate that the company's two-year trend of declining EPS should continue in the coming year. Net income decreased to -$30.9 million from $20 million in the same quarter last year, and return on equity also decreased. ASM's gross profit margin of 33.9% is below what it was in the year-ago quarter, and the net profit margin of -26.1% is below the industry average. Net operating cash flow fell 84.3% to $7.9 million compared with the year-ago quarter.

We've upgraded BP ( BP) from hold to buy, driven by its attractive valuation levels, considering its current price compared to earnings, book value and other measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Revenue fell 46.1% since the same quarter last year, and net income fell 63.9%, from $7.1 billion to $2.6 billion. EPS also declined compared with the year-ago quarter, and we feel that the company is likely to report an earnings decline in the coming year. BP's gross profit margin is 20.9%, though it has increased from the same quarter last year. The net profit margin of 5.4% trails the industry average.

We've upgraded F5 Networks ( FFIV) from hold to buy, driven by its solid stock price performance, increase in net income, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Net income increased 7% compared with the same quarter last year, rising from $17.8 million to $19 million. F5 has no debt to speak of and a quick ratio of 1.8. The company's gross profit margin of 81.3% has increased from the year-ago quarter, and its 12.3% net profit margin is above the industry average. Net operating cash flow increased 6.1% to $39.2 million compared with the year-ago quarter.

Shares have risen over the past year at a faster pace than the S&P 500. It goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

We've upgraded Mindray Medical ( MR) from sell to hold. Strengths include the company's robust revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.

Revenue leaped by 53.5% since the same quarter a year ago, and EPS improved. Mindray's debt-to-equity ratio of 0.3 is below the industry average, and its quick ratio is 1.3. The 55.7% gross profit margin has decreased from the year-ago quarter. The 18.9% net profit margin compared favorably with the industry average. ROE has decreased from the year-ago quarter.

Shares have plunged 41% over the past year, apparently dragged down in part by the decline we've seen in the S&P 500, but do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, Mindray is still more expensive than most of the other companies in its industry.

We've upgraded True Religion Apparel ( TRLG) from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Revenue rose by 19.1% since the same quarter last year, and EPS improved. True Religion has no debt to speak of and maintains a quick ratio or 6. Return on equity has improved compared with the year-ago quarter. The company's 60.9% gross profit margin has increased compared with the year-ago period, and the net profit margin of 12% is above the industry average. Net operating cash flow had increased 18.5% to $23 million compared with the year-ago quarter.

All ratings changes for May 26 are listed below.

Ticker
Company
Current
Change
Previous
AMIC American Independence HOLD Upgrade SELL
ANV Allied Nevada Gold SELL Initiated  
ASMI ASM International SELL Downgrade HOLD
BP BP BUY Upgrade HOLD
CRL Charles River Labs HOLD Upgrade SELL
DSWL Deswell Industries HOLD Upgrade SELL
EOG EOG Resources BUY Upgrade HOLD
FFIV F5 Networks BUY Upgrade HOLD
FLIC First Long Island BUY Upgrade HOLD
IPI Intrepid Potash HOLD Initiated  
MR Mindray Medical HOLD Upgrade SELL
NLC NALCO Holding HOLD Upgrade SELL
ODSY Odyssey Healthcare BUY Upgrade HOLD
OKS Oneok Partners BUY Upgrade HOLD
SAP SAP BUY Upgrade HOLD
SCL Stepan BUY Upgrade HOLD
SIRO Sirona Dental Systems HOLD Upgrade SELL
TRLG True Religion Apparel 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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