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TheStreet Open House

Micro-Cap Real Goods Solar (RSOL) Spikes 22%

Stocks in this article: RSOL

NEW YORK (TheStreet) -- Alternative energy company Real Goods Solar (RSOL) saw double-digit percentage growth in Monday morning trading, despite the absence of noteworthy news. Shares are up 22.3% to $4.42 as of 10:30 a.m. ET and 8.84 million shares have changed hands, well over its three-month daily average trading volume of 3.57 million.

The Colorado-based developer of commercial and residential solar energy technology will report third-quarter earnings on Nov. 6. In its second quarter, the company saw a 17.8% year-on-year jump in U.S. solar panel installations, even as revenue declined 3.3% to $20.7 million.

A big 2013 gainer, Real Goods Solar's share price has appreciated 480.2%, dwarfing the S&P 500 which has grown 22.21%.

TheStreet Ratings team rates Real Goods Solar Inc as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate Real Goods Solar Inc (RSOL) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. 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 analysis by TheStreet Ratings Team goes as follows:

  • 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 vs. -10 cents 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.

Written by Keris Alison Lahiff.

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