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

  • RSOL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.3 million.
  • RSOL has traded 2.5 million shares today.
  • RSOL is down 5.4% today.
  • RSOL was up 41.2% yesterday.

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More details on RSOL:

Real Goods Solar, Inc. operates as a residential and commercial solar energy engineering, procurement, and construction company in the United States. It provides commercial and residential solar energy solutions.

The average volume for Real Goods Solar has been 1.6 million shares per day over the past 30 days. Real Goods Solar has a market cap of $67.7 million and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 0.94 and a short float of 50.2% with 0.80 days to cover. Shares are up 194.7% 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 Real Goods Solar as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, generally high debt management risk, disappointing return on equity, poor profit margins and deteriorating net income.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 3.54 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, RSOL maintains a poor quick ratio of 0.84, 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 Electrical Equipment industry and the overall market, REAL GOODS SOLAR INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for REAL GOODS SOLAR INC is rather low; currently it is at 23.92%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -14.07% is significantly below that of the industry average.
  • REAL GOODS SOLAR INC's earnings per share declined by 22.2% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, REAL GOODS SOLAR INC reported poor results of -$1.76 versus -$0.10 in the prior year.
  • The change in net income from the same quarter one year ago has exceeded that of the Electrical Equipment industry average, but is less than that of the S&P 500. The net income has decreased by 15.5% when compared to the same quarter one year ago, dropping from -$2.52 million to -$2.91 million.

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

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