TSC Ratings' Updates: General Electric

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 Wednesday, June 24.

We've upgraded Computer Task Group ( CTGX) from hold to buy, driven by its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Computer Task Group has no debt to speak of and a quick ratio of 1.6, demonstrating its ability to cover short-term liquidity needs. The company's return on equity has improved slightly compared with the year-ago quarter, which can be construed as a modest strength in the organization, outperforming the S&P 500 but underperforming the industry average. Earnings per share were flat in the most recent quarter compared with the same quarter last year. During the past fiscal year, EPS increased to 50 cents vs. 26 cents in the prior year, but we feel the company is likely to report a decline in earnings in the coming year to 35 cents a share.

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 downgraded General Electric ( GE) from hold to sell, driven by its feeble growth in its earnings per share, generally weak debt management, weak operating cash flow and generally disappointing historical performance in the stock itself.

EPS declined by 39.5% in the most recent quarter year over year and have declined over the last two years, a trend we anticipate should continue in the coming year. GE's debt-to-equity ratio is very high at about 5, which is above the industry average, implying very poor management of debt levels within the company. Net operating cash flow fell to -$464 million in the most recent quarter. ROE has decreased slightly compared with the year-ago quarter but still outperforms both the industry average and the S&P 500.

Shares are down 57.7% over the past year, underperforming the S&P 500. Turning toward the future, the fact that the stock has come down in price over the past year 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 Retail Ventures ( RVI) from hold to sell, driven by its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income and disappointing return on equity.

Retail Ventures ahs experienced a steep decline in EPS in the most recent quarter compared with the year-ago quarter, and we anticipate that the company's yearlong pattern of negative EPS growth should continue in the coming year. Net income fell to -$43.9 million from $28.2 million in the year-ago quarter, underperforming the multiline retail industry average but outperforming the S&P 500. ROE has decreased greatly from the year-ago quarter, a signal of major weakness within the corporation. The company's debt-to-equity ratio is somewhat low at 0.7, below the industry average, but its 0.9 quick ratio is could be a cause for future problems.

Shares have tumbled by 48.8% over the past year, underperforming the S&P 500, but 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.

All ratings changes from June 24 are listed below.

Company (TICKER)
Current
Change
Prev
Computer Task Group(CTGX) BUY Upgrade HOLD
General Electric(GE) SELL Downgrade HOLD
International Absorbents(IAX) BUY Upgrade HOLD
LML Payment Systems(LMLP) HOLD Upgrade SELL
Motorcar Parts of America(MPAA) SELL Downgrade HOLD
Retail Ventures(RVI) SELL Downgrade HOLD
Stewardship Financial(SSFN) HOLD Downgrade BUY

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.

TheStreet.com Ratings, recently cited for Best Stock Selection from October 2007 through February 2009 , is an independent research provider that combines fundamental and technical analysis to offer investors tremendous value in volatile times. To see how your portfolio can use this research, click here now!

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