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Why ZBB Energy (ZBB) Stock Is Jumping Today

Stocks in this article: ZBB

NEW YORK (TheStreet) -- ZBB Energy (ZBB) was jumping 20.1% to $1.79 Friday following positive fiscal third quarter earnings.

For the fiscal third quarter ZBB energy reported break-even earnings, compared to a loss of -18 cents a share in the year-ago quarter. Revenue grew to $4.57 million in the third quarter, up from $2.12 million in the same quarter last year.

"The completion of our secondary offering and the initiation of the Lotte Chemical project strengthened our balance sheet this quarter and enhanced our financial capacity to more aggressively pursue the multiple sales opportunities in our markets," president and CEO Eric C. Apfelbach said in a press release. "To prepare for these opportunities, we are actively working to add staff in our sales and technical areas, including our recent hire of a sales manager for Hawaii."

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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 a few notable 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 generally high debt management risk, 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:

  • 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 conjunction, when comparing current results to the industry average, ZBB ENERGY CORP has marginally lower results.
  • In its most recent trading session, ZBB 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.
  • ZBB, with its very weak revenue results, has greatly underperformed against the industry average of 3.3%. 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.
  • You can view the full analysis from the report here: ZBB Ratings Report

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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