This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, our headlines include an upgrade for Bank of Kentucky (NASDAQ: BKYF), but downgrades for both Shutterfly (SFLY) and VCA Antech (WOOF). Let's begin, and feel free to sing along...

"I was born a coal miner's banker"
Investment banker R.W. Baird begins the trading week with a song, singing the praises of Bank of Kentucky, a $28-a-share small cap that the analyst says is destined to hit $32 before the year is out. Unfortunately for shareholders, Baird is the only one who seems to think this -- the only analyst  following the stock at all, it seems.

Even more unfortunate: The analyst is probably wrong.

B of K shares cost 11.5 times earnings, after all, and while it's true they pay a tidy dividend (2.6%), even Baird only believes the stock capable of about 6% annualized profits growth over the next five years. That seems too low, too slow, to justify the double-digit P/E ratio. For while B of K sells for a lower P/E than its peers, it's also growing much slower than the average regional bank, most of which are pegged for growth rates of 8% and up.

Long story short, while I probably wouldn't short it, I wouldn't go too far long on Bank of Kentucky. There are better alternatives out there.

Shutterfly doesn't click 
Next up, we turn to Shutterfly, subject of a downgrade to neutral from analysts at Monness, Crespi, Hardt & Co. this morning. The big question here, though, is why Monness didn't just go ahead and rate the stock a sell.

After all, at a valuation of more than 230 times earnings, the stock appears to have little upside. But here's the thing: Shutterfly is one of those companies that generates a lot more cash from its business than its income statement lets on. In fact, its $47 million in free cash flow generated over the past year is more than eight times the amount of "net income" it was allowed to report under GAAP.

Unfortunately, even all this cash isn't enough to get Shutterfly down to much less than a 25 times FCF valuation. For the 17.5% long-term growth the company is expected to produce, that's still too high a price to pay. Shutterfly is at best a hold... and if its cash machine slows down much at all, could even deserve a sell rating.

This stock's a dog
 Last and -- in the opinion of Wall Street -- least, we come to VCA Antech, the little dog doctor that's trying to roll up and consolidate the veterinary industry. Antech's fourth-quarter and full-year 2012 results are due out Feb. 14, but ace stock picker Stifel Nicolaus isn't waiting around to hear the bad news. They're downgrading the stock today, and all the way down to "sell."

But why? I mean, Antech doesn't seem all that outrageously expensive on the surface. Indeed, its 18.5 times earnings valuation looks a whole lot more reasonable than the triple-digit figure we find at Shutterfly. On the other hand, though, Antech looks pretty mangy in other respects.

For example, its growth rate is only 13.4%, which seems too little to justify the P/E ratio. Antech also carries quite a bit of debt, $560 million net of cash on hand. And of course, with all its cash going to consolidating competitors, the company pays no dividend at all.

That last point's key. You see, Antech fans may latch onto the fact that the company's annual "free cash flow" number of $140 million is 40% ahead of reported earnings. They may argue this makes the stock cheap. Problem is, if you count cash spent on acquisitions against free cash flow (as I think you must -- buying up competitors is integral to the company's business model), then the company's real free cash flow number is probably something closer to $16 million per annum -- 84% below reported net income.

In short, this stock's got a terminal case of financial worms. Stifel is right when it says it should probably be put down.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends VCA Antech.