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Why Elephant Talk (ETAK) Stock Is Higher Today

NEW YORK (TheStreet) -- Shares of Elephant Talk Communications Corp. (ETAK) are up 10.8% to $1.23 in trading Wednesday. The mobile networking software company reported 2013 fourth quarter revenue of $6 million, a 64% increase from the previous fourth quarter of $3.6 million. Adjusted EBITDA for the quarter was approximately $143,000, an improvement of $1.9 million year-over-year and $227,000 sequentially.

Its margins increased 82% compared with 39% in fourth quarter of 2012.

The company also announced that it was appointing two independent directors to its board.

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TheStreet Ratings team rates ELEPHANT TALK COMM INC as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ELEPHANT TALK COMM INC (ETAK) a SELL. This is based on the dominance of unfavorable 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, weak operating cash flow and generally disappointing historical performance in the stock itself."

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

  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, ELEPHANT TALK COMM INC'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 -$2.39 million or 676.14% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • In its most recent trading session, ETAK has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Diversified Telecommunication Services industry average, but is greater than that of the S&P 500. The net income increased by 41.1% when compared to the same quarter one year prior, rising from -$5.48 million to -$3.23 million.
  • ETAK, with its decline in revenue, underperformed when compared the industry average of 2.1%. Since the same quarter one year prior, revenues fell by 22.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: ETAK Ratings Report
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  • 2013 fourth quarter revenue totaled $6.0 million, of which $5.9 million was attributable to the mobile and security solutions, as compared to $3.6 million for the fourth quarter of 2012, or an increase of approximately 64%.
  • Sequentially, mobile and security revenue of $5.9 million for the fourth quarter of 2013 increased approximately 18% as compared to $5.0 million for the third quarter of 2013.

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