NEW YORK (TheStreet) -- Sigma Designs (SIGM - Get Report) was gaining 18.2% to $4.76 Thursday after beating analysts' estimates for earnings in the first quarter and an upgrade from Needham & Company.
For the first quarter Sigma Designs reported a loss of -14 cents a share, beating the Capital IQ Consensus Estimate of a loss of -15 cents a share by 1 cent. Revenue fell -29.8% to $36.9 million for the quarter, in-line with analysts' estimates.
Following the first-quarter results Needham upgraded Sigma Designs to "buy" from "hold," setting a price target of $5.50 for the stock.
TheStreet Ratings team rates SIGMA DESIGNS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate SIGMA DESIGNS INC (SIGM) 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. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SIGM's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 29.38%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- 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 Semiconductors & Semiconductor Equipment industry and the overall market, SIGMA DESIGNS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- SIGM, with its decline in revenue, underperformed when compared the industry average of 3.2%. Since the same quarter one year prior, revenues fell by 12.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for SIGMA DESIGNS INC is currently very high, coming in at 71.30%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, SIGM's net profit margin of 3.25% significantly trails the industry average.
- Net operating cash flow has significantly increased by 235.58% to $13.08 million when compared to the same quarter last year. In addition, SIGMA DESIGNS INC has also vastly surpassed the industry average cash flow growth rate of 3.91%.
- You can view the full analysis from the report here: SIGM Ratings Report