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A HANDFUL OF the biggest Buffalo-area publicly held companies got their report card last week and, judging by the results, investors might want to send them off to summer school.

On the whole, the eight local stocks included in the survey by Financial World magazine came about as close to flunking as you can, without actually doing so. On a scale where an "A " is the best grade and a "D" is the worst, the Buffalo-area stocks came away with an average grade of "C--".

The main reason is that most of the local stocks did poorly in two of the areas that mattered most -- sales and earnings growth during the last four quarters. It also didn't help that the prices of each local stock dropped during the previous three months -- another category used to determine each stock's grade.

Basically, the rating system emphasized recent growth and profits, while paying little heed to a company's size or its dividends. The survey covered the 3,000 biggest U.S. companies.

In a class of underachievers, Ecology & Environment Inc. stood out. The Lancaster-based environmental services company had the highest grade of any local stock (an A--) thanks mainly to its strong sales and earnings growth during the last four quarters.

But four other local companies -- Acme Electric Corp., Computer Task Group Inc., National Fuel Gas Co. and Trico Products Corp. -- all are candidates for Financial World's dunce cap. Each of those companies got a D, a "poor" rating that leaves them at the bottom of the list.

What hurt most of those bottom four companies were declining earnings or, in the case of Computer Task Group, a loss during the preceding four quarters.

Sales also were sluggish at each of the companies -- a factor that was particularly apparent when a normally stodgy utility, National Fuel, had a bigger increase than any of its local counterparts at the bottom of the list.

And so, from top to bottom, here's a closer look at each of the local stocks graded.

Ecology & Environment, undoubtedly, is the only local stock that has a firm base in the trendy environmental movement.

With concerns mounting about pollution problems and lots of work available to clean up existing environmental messes, E&E turned in some solid growth during the last year. Based on figures released before Oct. 31, E&E's sales are up 25 percent and its earnings per share are up 27 percent.

E&E's rating might even be higher if the survey were conducted today, since its stock has shot up 22 percent since the end of October.

What's more, E&E scored well in the other two categories used in the ratings -- a company's debt-to-equity ratio and its return on capital. E&E has very little long-term debt and its return on capital was a respectable 9.6 percent.

First Empire State Corp., the parent of M&T Bank, bucked the trend that has hammered bank stocks lately, but the Buffalo-based company still got just a B--, or below average, rating.

A 19 percent drop in its stock price between July and October hurt First Empire, while its healthy but unspectacular 18 percent increase in earnings per share during the last 12 months didn't stack up in a survey geared toward rapid growth. Neither did its solid 13 percent growth in revenues or its 12.1 percent return on capital ratio.

Integrated Waste Services Corp. also got a B--, although the local waste management firm is in a business that's a lot more popular with investors these days than banking. Despite a 113 percent rise in sales and a 131 percent jump in earnings during the 12-month period, the company's grade was brought down because of a high debt-to-equity ratio of 217 percent.

In addition, its stock price was off 13 percent during the period covered by the survey and its return on capital was a modest 5.3 percent.

Pratt & Lambert Inc. managed to finish in the top half of the Buffalo-area companies rated, but the paint manufacturer's grade wasn't much to brag about. Pratt & Lambert got a C, which translates to a speculative rating.

A 13 percent drop in stock price from July through October, combined with a 3 percent decline in earnings per share during the latest 12 months, didn't help Pratt & Lambert's grade. A sluggish 1 percent increase in sales during the 12-month period also hurt, despite a decent 8.4 percent return on capital.

Then, there were the Disappointing Ds.

Acme Electric's problems were similar to Pratt & Lambert's, only worse. Earnings at the East Aurora-based company were off 24 percent, while its three-month stock price fell 31 percent. Its sales grew only 1 percent and its debt-to-equity ratio was on the high side at 79 percent.

Computer Task Group is starting to turn things around after losing $7.8 million during 1989. The Buffalo-based company is profitable again, but last year's loss made for plenty of unfavorable comparisons when the time came for Financial World to give CTG a grade.

Not only did CTG have a 56-cents-a-share loss during the 12-month period used to calculate the ratings, but the company's sales also slipped by 2 percent. Making matters worse, the stock was hammered between July and October, losing 27 percent of its value.

National Fuel is a utility, and that goes a long way toward explaining why the Buffalo-based firm did so poorly in Financial World's growth-oriented grading system. Even so, National Fuel's 10 percent decline in earnings and its 6 percent drop in stock price didn't do much to overcome the grading system's bias toward growth.

Trico didn't get a good grade because its sales were off 8 percent during the 12-month period used for the ratings, mainly because of sluggish car sales. In addition, the windshield wiper manufacturer's stock price fell 2 percent and its return on capital was a weak 3.4 percent. The rating also didn't fully reflect that the company is profitable again after rebounding from a $5.6 million loss last year.

Two other local stocks -- Mark IV Industries Inc. and Moog Inc. -- were included in the survey but weren't graded because of incomplete information.

And another company with close ties to Western New York -- Florida-based Kimmins Environmental Service Corp. -- took it on the chin, despite being in the popular pollution-control business.

Kimmins got a D, mainly because of a 39 percent drop in earnings and a 44 percent drop in stock price, not to mention a hefty 144 percent debt-to-equity ratio.

Whatever the reason, grades like that are enough to make parents and investors see red. The question, however, is how investors can get a company to study harder.

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