CAE, Dresser-Rand: Ratings Changes

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.

BOSTON ( TheStreet) -- TheStreet.com's stock-rating model upgraded Canadian aerospace and defense company CAE ( CAE) to "buy."

The numbers: Fiscal first-quarter profit decreased 42% to $27 million, or 11 cents a share, as revenue declined 2% to $383 million. Its gross margin rose from 23% to 24% and its operating margin remained steady at 19%. A quick ratio of 0.7 indicates less-than-ideal liquidity. A debt-to-equity ratio of 0.5 reflects conservative leverage.

The stock: CAE is up 18% this year, beating the Dow Jones Industrial Average and S&P 500 Index. The stock trades at a price-to-earnings ratio 13, indicating a discount to the market, but parity with aerospace and defense peers.

The model upgraded oil and gas equipment maker Dresser-Rand ( DRC) to "buy."

The numbers: Second-quarter net income rose 29% to $60 million and earnings per share climbed 35% to 74 cents, boosted by a lower share count. Revenue grew 12% to $606 million. Its gross margin was unchanged at 30%, but its operating margin rose from 14% to 16%. A quick ratio of 0.7 demonstrates less-than-ideal liquidity. A debt-to-equity ratio of 0.4 reflects conservative leverage.

The stock: Dresser-Rand has advanced 81% this year, more than major U.S. indices. The stock trades at a price-to-earnings ratio of 12, a discount to the market and oil and gas equipment peers. The company doesn't pay dividends.

The model upgraded medical-device maker Masimo ( MASI) to "buy."

The numbers: Second-quarter net income jumped 24% to $13 million and earnings per share rose 22% to 22 cents, restrained by a higher share count. Revenue grew 12% to $84 million. Its gross margin rose from 73% to 74% and its operating margin increased from 22% to 24%. A quick ratio of 3.9 indicates outstanding liquidity. The company holds minimal debt.

The stock: Masimo is down 13% this year, lagging behind major U.S. indices. The stock trades at a price-to-earnings ratio of 40, a premium to the market and health care equipment peers. The company doesn't pay dividends.

The model upgraded Plexus ( PLXS), a provider of manufacturing services, to "buy."

The numbers: Fiscal third-quarter net income decreased 47% to $9.2 million and earnings per share fell 44% to 23 cents, cushioned by a lower share count. Revenue dropped 17% to $379 million. Its gross margin declined from 12% to 11% and its operating margin descended from 5% to 3%. A quick ratio of 1.4 indicates adequate liquidity. A debt-to-equity ratio of 0.3 is below the industry average, demonstrating restrained leverage.

The stock: Plexus is up 55% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 22, a premium to the market, but a discount to manufacturing service peers.

The model downgraded health-care-facility operator Psychiatric Solutions ( PSYS) to "hold."

The numbers: Second-quarter net income rose 18% to $34 million and earnings per share jumped 21% to 63 cents. Revenue grew 6% to $471 million. Its gross margin rose from 17% to 19% and its operating margin climbed from 15% to 16%. A quick ratio of 1.4 indicates adequate liquidity. But a debt-to-equity ratio of 1.3 reflects excessive debt.

The stock: Psychiatric Solutions has dropped 5% this year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 13, a discount to the market and health care facility peers. The company doesn't pay dividends.

-- Reported by Jake Lynch in Boston.

More from Opinion

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

Musk Goes on Unoriginal Media Tirade

Musk Goes on Unoriginal Media Tirade

What's Happening in Video Games This Week: On the Road to E3

What's Happening in Video Games This Week: On the Road to E3

Wednesday Wrap-Up: Let's Talk About General Electric

Wednesday Wrap-Up: Let's Talk About General Electric

Week of the Women From Finance to Fast Food

Week of the Women From Finance to Fast Food