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Perilous Reversal Stock: Clean Diesel Technologies (CDTI)

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 Clean Diesel Technologies ( CDTI) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Clean Diesel Technologies as such a stock due to the following factors:

  • CDTI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $18.9 million.
  • CDTI has traded 162,228 shares today.
  • CDTI is down 3.3% today.
  • CDTI was up 25.4% yesterday.

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More details on CDTI:

Clean Diesel Technologies, Inc. engages in the manufacture and distribution of heavy duty diesel and light duty vehicle emissions control systems and products to automakers, integrators, and retrofitters worldwide. The company operates in two divisions, Heavy Duty Diesel Systems and Catalyst. Currently there are 2 analysts that rate Clean Diesel Technologies a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Clean Diesel Technologies has been 517,800 shares per day over the past 30 days. Clean Diesel has a market cap of $30.0 million and is part of the industrial goods sector and industrial industry. The stock has a beta of 2.45 and a short float of 5.5% with 0.12 days to cover. Shares are up 115.3% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Clean Diesel Technologies as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:

  • The debt-to-equity ratio of 1.47 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, CDTI has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity 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 Chemicals industry and the overall market, CLEAN DIESEL TECHNOLOGIES'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 -$0.08 million or 104.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for CLEAN DIESEL TECHNOLOGIES is currently lower than what is desirable, coming in at 32.36%. Regardless of CDTI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CDTI's net profit margin of -7.67% significantly underperformed when compared to the industry average.
  • CDTI, with its decline in revenue, underperformed when compared the industry average of 13.5%. Since the same quarter one year prior, revenues slightly dropped by 1.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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