Usually when analysts downgrade a company, it means the company is in trouble, or its future looks grim. Whatever the case is, when a stock is downgraded, it is imperative to keep a close eye on it, and decide if it is worth holding onto if you are already invested.
Laboratory Corporation of America Holdings (LH) is currently trading at $79.27. Looking at the basics, the company looks to be doing well, with EPS of 5.03 and a P/E of 15.76x and a forward P/E of 11.21. LH, however does hold a lot of debt. Their total cash is 118.90M and total debt is 2.00B from its balance sheet. It seems as if this company might have hit a peak and be trailing off. Either way, performance is still relatively good, with an ROA of 11.75% and ROE of 22.18%. One thing to watch other than debt is its quarterly earnings growth, which yoy is -20.00%.
99 Cents Only Stores (NDN) is currently trading at $21.41 and has been downgraded by analyst from a buy to a neutral. The 1-year target price estimate is at $20.25, which if accurate shows that this stock is overpriced and holds a book value of $9.95. The 50-day moving average is $18.95 and the 200-day moving average is $19.61. NDN is currently at its 52-week high. Seems this stock is poised for a reduction in stock price soon. On the other hand, the company has almost no debt on its books with 211.82M in cash and 484,000 in debt. Also, during economic slowdowns, "thrifty stores" have proven well, and we are at the brink of another recession. Downgraded, yes, but one to watch.
Spring Nextel Corporation (S) is currently trading at $2.40 and has been downgraded from a buy to a hold by analysts. The company, however still holds a 1-year target estimate of $5.28. Current EPS is -1.05 and has a PEG ratio of -3.93. Total cash is 4.27B and total debt is 18.53B. Sprint is about to launch the iPhone, so it will indeed be a player to watch, and with a 52-week price change of -50.22% might be a player that has bottomed out. Ad the third-largest wireless carrier, I don't see this company going anywhere, but it is most definitely struggling right now. This is a downgrade that is worth keeping on your watch list.
Sunesis Pharmaceuticals, Inc (SNSS) is currently trading at $1.30, and has been downgraded by analysts from outperform to sector perform. The 52-week range is between $0.30 and $3.16, so it still has some room for improvement, but also a lot to lose. Current EPS is -0.5 and a book value of $0.86. The good thing about this micro cap is that its current cash is 48.83M and it has no debt. Price/sales is 16.21 and price/book is 1.61. ROA is very scary for this company at -27.36%, and ROE is -50.96%. The 200-day moving average is 1.96, but its operating margin is -547.78% compared to the industry at -84.82%. This is a downgrade to watch carefully, especially if you own it.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.