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Trade-Ideas: Hanwha SolarOne (HSOL) Is Today's "Perilous Reversal" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Hanwha SolarOne ( HSOL) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Hanwha SolarOne as such a stock due to the following factors:

  • HSOL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $19.8 million.
  • HSOL has traded 2.2 million shares today.
  • HSOL is down 3.8% today.
  • HSOL was up 5.8% yesterday.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in HSOL with the Ticky from Trade-Ideas. See the FREE profile for HSOL NOW at Trade-Ideas

More details on HSOL:

Hanwha Solarone Co., Ltd., an investment holding company, engages in the manufacture and sale of silicon ingots, silicon wafers, photovoltaic (PV) cells, and PV modules.

The average volume for Hanwha SolarOne has been 1.6 million shares per day over the past 30 days. Hanwha SolarOne has a market cap of $338.4 million and is part of the technology sector and electronics industry. Shares are up 261.4% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Hanwha SolarOne as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 2.24 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, HSOL maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, HANWHA SOLARONE CO LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for HANWHA SOLARONE CO LTD is currently extremely low, coming in at 14.67%. Regardless of HSOL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HSOL's net profit margin of -14.03% significantly underperformed when compared to the industry average.
  • HANWHA SOLARONE CO LTD has improved earnings per share by 36.0% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, HANWHA SOLARONE CO LTD reported poor results of -$2.97 versus -$1.81 in the prior year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 35.6% when compared to the same quarter one year prior, rising from -$41.97 million to -$27.05 million.

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