NEW YORK (TheStreet) -- StemCells (STEM - Get Report) shares are down -9.1% to $1.84, on Tuesday after announcing its intent to offer 11.3 million shares of common stock in an effort to raise $20 million in an offering expected to close on or before July 18.
Buyers can purchase one share of common stock and a warrant to purchase 85% of a share of stock at an offering price of $1.77 per unit.
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TheStreet Ratings team rates STEMCELLS INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate STEMCELLS INC (STEM) 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 deteriorating net income, disappointing return on equity and generally high debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Biotechnology industry average. The net income has decreased by 18.8% when compared to the same quarter one year ago, dropping from -$6.42 million to -$7.62 million.
- 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 Biotechnology industry and the overall market, STEMCELLS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio is very high at 2.08 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 3.19, which shows the ability to cover short-term cash needs.
- Net operating cash flow has slightly increased to -$6.51 million or 2.16% when compared to the same quarter last year. Despite an increase in cash flow, STEMCELLS INC's cash flow growth rate is still lower than the industry average growth rate of 16.87%.
- Despite its growing revenue, the company underperformed as compared with the industry average of 26.8%. Since the same quarter one year prior, revenues rose by 19.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- You can view the full analysis from the report here: STEM Ratings Report