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Why Dynasil Corporation (DYSL) Exploded on Monday

NEW YORK (TheStreet) -- Shares of Dynasil Corporation of America (DYSL - Get Report) exploded on Monday after the company announced its subsidiary Optometrics Corporation had signed a three-year comprehensive supply agreement with a division of L-3 Communications.

Optometrics will provide high-quality optical components to L-3 Communications, a developer of intelligence, surveillance and reconnaissance technology.

By midmorning, shares had soared 55.8% to $1.90. Trading volume of 2.9 million was more than 43 times its three-month daily average.

"It is an important piece of business for us, which will bring Optometrics' technology to a highly technical and competitive industry. Optometrics' creative approach to product development and production scale-up were key determinants in the selection process," said Dynasil CEO Peter Sulick in a statement.

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The company expects to deliver more than $4 million in product to L-3 over the life of the agreement and will add approximately 15 new jobs at Optometrics to scale production.

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TheStreet Ratings team rates DYNASIL CORP OF AMERICA as a Sell with a ratings score of E+. The team has this to say about their recommendation:

"We rate DYNASIL CORP OF AMERICA (DYSL) a SELL. This is based on a variety of negative investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally high debt management risk."

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

  • 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 Electronic Equipment, Instruments & Components industry and the overall market, DYNASIL CORP OF AMERICA's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite currently having a low debt-to-equity ratio of 0.51, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.50 is very low and demonstrates very weak liquidity.
  • DYNASIL CORP OF AMERICA reported significant earnings per share improvement 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, DYNASIL CORP OF AMERICA reported poor results of -$0.59 versus -$0.29 in the prior year.
  • 44.03% is the gross profit margin for DYNASIL CORP OF AMERICA which we consider to be strong. Regardless of DYSL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DYSL's net profit margin of 13.61% compares favorably to the industry average.
  • Net operating cash flow has significantly increased by 173.09% to $0.16 million when compared to the same quarter last year. In addition, DYNASIL CORP OF AMERICA has also vastly surpassed the industry average cash flow growth rate of -9.33%.

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