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TheStreet Open House

Why Mitek Systems (MITK) Stock Is Down Today

NEW YORK (TheStreet) -- Mitek Systems  (MITK)MITK was falling -21.5% to $2.40 Monday following a court ruling and the resignation of its CTO.

A federal court recently granted an USAA motion to dismiss Mitek's patent infringement claims on four patents according to the San Antonio Express-News. A trial for Mitek's and USAA's remaining claims is scheduled for Sept. 8. Mitek originally sued USAA for patent infringement, while USAA accused the company of breach of contract and fraud.

Mitek also disclosed that CTO Michael Strange left the company in a recently filing. Strange left the company to "pursue other opportunities."

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

"We rate MITEK SYSTEMS INC (MITK) a SELL. This is driven by multiple 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:

  • MITK'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 42.52%, 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market, MITEK SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for MITEK SYSTEMS INC is currently very high, coming in at 86.95%. Regardless of MITK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MITK's net profit margin of -35.04% significantly underperformed when compared to the industry average.
  • MITK has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.93, which clearly demonstrates the ability to cover short-term cash needs.
  • MITEK SYSTEMS INC has improved earnings per share by 37.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MITEK SYSTEMS INC continued to lose money by earning -$0.27 versus -$0.31 in the prior year. This year, the market expects an improvement in earnings (-$0.24 versus -$0.27).
  • You can view the full analysis from the report here: MITK 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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