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TheStreet Open House

Why NetSol Technologies (NTWK) Stock Is Soaring Today

NEW YORK (TheStreet) -- NetSol Technologies  (NTWK) rose Wednesday after the software company announced it signed an agreement to implement NFS Ascent with a major Asian financial group.

The deal, valued at more than $16 million, schedules the implementation to finish within the next 18 months. The first phase is scheduled to go live in Feb. 2015.

The news comes one day after the stock plunged to a 52-week low of $2.68. On Wednesday, the stock was up 37.18% to $3.80 at 3:14 p.m. More than 1.5 million shares changed hands, which eclipsed the average volume of 54,305.

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Separately, TheStreet Ratings team rates NETSOL TECHNOLOGIES INC as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate NETSOL TECHNOLOGIES INC (NTWK) 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. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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 significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 183.2% when compared to the same quarter one year ago, falling from $1.56 million to -$1.30 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 Software industry and the overall market, NETSOL TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 65.33%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 229.16% compared to the year-earlier 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.
  • NETSOL TECHNOLOGIES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, NETSOL TECHNOLOGIES INC increased its bottom line by earning $1.12 versus $0.40 in the prior year. For the next year, the market is expecting a contraction of 162.5% in earnings (-$0.70 versus $1.12).
  • The revenue fell significantly faster than the industry average of 11.5%. Since the same quarter one year prior, revenues fell by 25.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: NTWK 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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