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Why Hydrogenics (HYGS) Stock Is Plummeting Before Market Open

NEW YORK (TheStreet) -- Hydrogenics (HYGS - Get Report) stock is tumbling in pre-market trading after the hydrogen energy developer announced a public offering of 1.5 million common shares (1 million from treasury and 500,000 secondary shares by CommScope, a selling shareholder). 

Before market open, shares had tumbled 21.9% to $15.30.

Hydrogenics priced the offering at $15 a share. The company said net proceeds are expected to total $13.7 million after deducting underwriting commissions and other expenses and will be used for general corporate purposes, including to support any negative cash flows from operating activities. Hydrogenics will receive no proceeds from the sale of shares by CommScope. 

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Canaccord Genuity is acting as the sole book-running manager, and Craig-Hallum Capital Group and Roth Capital Partners are acting as co-managers for the offering. The offering is expected to close around May 16. 

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

"We rate HYDROGENICS CORP (HYGS) a SELL. This is driven by several weaknesses, 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 weak operating cash flow and poor profit margins."

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

  • Net operating cash flow has significantly decreased to -$2.05 million or 135.67% 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 HYDROGENICS CORP is currently lower than what is desirable, coming in at 25.91%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, HYGS's net profit margin of -28.18% significantly underperformed when compared to the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Electrical Equipment industry and the overall market, HYDROGENICS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.79 is somewhat weak and could be cause for future problems.
  • The net income growth from the same quarter one year ago has exceeded that of the Electrical Equipment industry average, but is less than that of the S&P 500. The net income increased by 8.5% when compared to the same quarter one year prior, going from -$3.39 million to -$3.10 million.

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