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Ocean Power Technologies (OPTT) Earnings: What to Expect

NEW YORK (TheStreet) -- Ocean Power Technologies (OPTT) is due to report its third quarter before the bell Friday, March 14.

Analysts surveyed by Thomson Reuters anticipate a net loss of $3.76 million, or 31 cents a share, on revenue of $920,000 for the three months to January.

In its second quarter ended October, the wave energy specialist recorded a net loss of $3.27 million, or 31 cents a share, on $460,000 in revenue.

On Tuesday, shares have surged 15.3% to $5.44.

In mid-February, shares soared after the company announced a partenership with Lockheed Martin (LMT) to develop the world's largest project harnessing wave energy. Based off the coast of Victoria, Australia, the project will use Ocean Power's technology which converts wave energy into clean energy via the bobbing movement of a buoy. The mechanical energy produced drives an electrical generator, which transmits power through an underwater cable.

The project is due for completion as early as 2018.

Since the beginning of the year, the stock is up 184.3%.

Must read: Warren Buffett's 10 Favorite Stocks

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

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

"We rate OCEAN POWER TECHNOLOGIES INC (OPTT) 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 disappointing return on equity, weak operating cash flow and poor profit margins."

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 Electrical Equipment industry and the overall market, OCEAN POWER TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$3.41 million or 16.37% 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.
  • The gross profit margin for OCEAN POWER TECHNOLOGIES INC is rather low; currently it is at 23.92%. Regardless of OPTT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, OPTT's net profit margin of -704.95% significantly underperformed when compared to the industry average.
  • OPTT, with its very weak revenue results, has greatly underperformed against the industry average of 5.8%. Since the same quarter one year prior, revenues plummeted by 65.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • OPTT's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.92, which clearly demonstrates the ability to cover short-term cash needs.

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

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.

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