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Why Giga-tronics (GIGA) Stock Is Jumping Today

NEW YORK (TheStreet) -- Giga-tronics (GIGA) was gaining 67.8% to $4.11 Tuesday after receiving a $2.4 million order from the U.S. Navy.

The order includes Giga-tronics' Model 8003 Precision Scalar Analyzer, which the company says "combines fast measurement capability with the accuracy and linearity of a power meter in a single instrument." Giga-tonics expects to ship the equipment to the Navy over the new six months.

The announcement comes less than a week before Giga-tronics is scheduled to report its fiscal fourth quarter results on June 23.

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

"We rate GIGA-TRONICS INC (GIGA) a SELL. This is driven by some concerns, 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 disappointing return on equity and generally high debt management risk."

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

  • 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 Electronic Equipment, Instruments & Components industry and the overall market, GIGA-TRONICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite currently having a low debt-to-equity ratio of 0.55, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that GIGA's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.56 is low and demonstrates weak liquidity.
  • 39.36% is the gross profit margin for GIGA-TRONICS INC which we consider to be strong. Regardless of GIGA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GIGA's net profit margin of -21.01% significantly underperformed when compared to the industry average.
  • GIGA, with its decline in revenue, underperformed when compared the industry average of 9.2%. Since the same quarter one year prior, revenues fell by 13.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the Electronic Equipment, Instruments & Components industry average, but is less than that of the S&P 500. The net income increased by 17.0% when compared to the same quarter one year prior, going from -$0.87 million to -$0.72 million.
  • You can view the full analysis from the report here: GIGA Ratings Report

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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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