TheStreet.com 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 total return performance. TheStreet.com's stock-rating model upgraded Amtrust Financial Services ( AFSI) to "buy." The numbers: Second-quarter net income increased 2% to $27 million, or 45 cents a share. Revenue grew 5% to $183 million. Its gross margin dropped from 32% to 25% and its operating margin fell from 23% to 20%. Amtrust is adequately capitalized, with $447 million of cash. But a debt-to-equity ratio of 1.2 indicates higher-than-ideal leverage. The stock: Amtrust has advanced 11% this year, outperforming the Dow Jones Industrial Average, but underperforming the S&P 500 Index. The stock trades at a price-to-earnings ratio of 9, indicating a sizable discount to the market and insurance peers, and offers a 1.9% dividend yield. The model upgraded racetrack owner Churchill Downs ( CHDN) to "buy." The numbers: Second-quarter profit rose 5% to $31 million, or $2.20 a share, as revenue increased marginally to $180 million. Its gross margin fell from 40% to 38% and its operating margin decreased from 28% to 27%. Churchill has a weak liquidity position, evident in its quick ratio of 0.5. But its balance sheet holds minimal debt. The stock: Churchill Downs has fallen 4% this year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 22, which is a slight premium to the market, but equal to gaming peers. The company pays a 1.3% dividend yield. The model upgraded aerospace and defense company Rockwell Collins ( COL) to "buy." The numbers: Fiscal third-quarter net income fell 17% to $145 million, or 91 cents a share. Revenue declined 9% to $1.1 billion. Its gross margin decreased from 33% to 32% and its operating margin slid from 21% to 20%. A quick ratio of 0.8 reflects less-than-ideal liquidity, but a debt-to-equity ratio of 0.4 indicates a sound capital structure.
The stock: Rockwell Collins has increased 19% this year, more than the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 12, which is a sizable discount to the market, but equal to aerospace and defense peers. The shares offer a 2% dividend yield. The model upgraded GSE Systems ( GVP), a software provider for energy and chemical companies, to "buy." The numbers: The company swung to a second-quarter profit of $600,000, or 3 cents a share, from a loss of $300,000, or 2 cents, in the year-earlier period. Its gross margin fell from 29% to 25% and its operating margin climbed from negative territory to 6%. GSE has an ideal financial position, with no debt and ample cash reserves, reflected by a quick ratio of 2.1. The stock: GSE Systems is up 17% this year, beating the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 149 because of its inconsistent profits. That's higher than the average for the market and application software peers. The company doesn't pay dividends. The model upgraded Urstadt Biddle Properties ( UBA), a real estate investment trust that specializes in retail, to "buy." The numbers: Second-quarter net income fell 3% to $7.4 million, but earnings per share remained steady at 16 cents due to a lower share count. Revenue increased 4% to $21 million. Its gross and operating margins fell from 45% to 41%. The REIT has weak liquidity, with just $3.4 million of reserves, compared to $109 million of debt. A debt-to-equity ratio of 0.3 is less than the industry average and indicates modest leverage.
The stock: Urstadt is down 2% this year, lagging behind major U.S. indices. The stock trades at a price-to-earnings ratio of 28, which is a premium to the market, but a discount to other retail REITs. The shares pay a cash distribution yield of 6.2%. Cash distributions are taxed differently than dividends. -- Reported by Jake Lynch in Boston. Follow TheStreet.com on Twitter and become a fan on Facebook.