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Why Luna Innovations (LUNA) Hit a One-Year High Today

NEW YORK (TheStreet) -- Luna Innovations  (LUNA) rose 88.64% to $2.49, up $1.17 from its previous close of $1.32, at the close of the trading day on Wednesday after the company announced that it had sold its shape-sensing technology for medical applications to Intuitive Surgical  (ISRG).

The stock had a volume of 6,654,202, which far exceeds its average of 51,587. It hit a one-year high of $3.36 and a low of $1.93 for the day. The stock also has a one-year low of $1.09.

Luna will receive $12 million upfront in two tranches from Intuitive Surgical and up to an additional $18 million based on specific technical milestones and commercial factors. Intuitive, in return, acquires Luna's fiber optic shape-sensing and localization technology and related patents. Intuitive will also hire engineers that Luna formerly used in its medical shape-sensing business. The sale also has language that keeps Luna's ability to handle its existing agreements and to continue to explore opportunities outside the medical field.

TheStreet Ratings team rates LUNA INNOVATIONS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate LUNA INNOVATIONS INC (LUNA) a SELL. This is driven by a number of negative factors, 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 unimpressive growth in net income, disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Professional Services industry. The net income has significantly decreased by 179.1% when compared to the same quarter one year ago, falling from -$0.22 million to -$0.61 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Professional Services industry and the overall market, LUNA INNOVATIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $0.06 million or 91.05% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • LUNA INNOVATIONS INC reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, LUNA INNOVATIONS INC reported poor results of -$0.15 versus -$0.12 in the prior year.
  • The revenue fell significantly faster than the industry average of 16.9%. Since the same quarter one year prior, revenues fell by 16.5%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • You can view the full analysis from the report here: LUNA Ratings Report

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