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Why ZBB Energy (ZBB) Is Slipping on Friday

NEW YORK (TheStreet) -- ZBB Energy (ZBB) is slipping on Friday after announcing and pricing a public offering of its common stock.

By market open, shares had slipped 16.7% to $2.65.

The renewable energy developer said it is offering 5.5 million shares of its common stock at a price of $2.25 a share, with the offer expected to close on March 19 pursuant to customary closing conditions.

Menomonee Falls, Wis.-based ZBB Energy also said it would grant the underwriter a 30-day option to purchase up to an additional 825,000 shares of common stock.

Funds raised will be used for working capital and general corporate purposes.

National Securities Corporations is acting as sole book-running manager for the offering.

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TheStreet Ratings team rates ZBB ENERGY CORP as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ZBB ENERGY CORP (ZBB) 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 generally high debt management risk, disappointing return on equity and weak operating cash flow."

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

  • Currently the debt-to-equity ratio of 1.55 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.22, which clearly demonstrates the inability to cover short-term cash needs.
  • 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, ZBB ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$2.42 million or 18.55% 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.
  • ZBB, 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 65.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 48.65% is the gross profit margin for ZBB ENERGY CORP which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -224.42% is in-line with the industry average.

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