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Real Goods Solar (RSOL) In A Perilous Reversal

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 $17.5 million.
  • RSOL has traded 113,774 shares today.
  • RSOL is down 7.1% today.
  • RSOL was up 5.3% 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. Currently there are 2 analysts that rate Real Goods Solar a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Real Goods Solar has been 3.3 million shares per day over the past 30 days. Real Goods Solar has a market cap of $153.3 million and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.00 and a short float of 29.3% with 1.58 days to cover. Shares are up 39.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Real Goods Solar as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues rose by 28.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 95.20% and other important driving factors, this stock has surged by 363.43% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • REAL GOODS SOLAR INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, REAL GOODS SOLAR INC reported poor results of -$1.76 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings (-$0.34 versus -$1.76).
  • The gross profit margin for REAL GOODS SOLAR INC is rather low; currently it is at 22.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -6.16% is significantly below that of the industry average.
  • Net operating cash flow has decreased to -$3.27 million or 23.80% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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