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TheStreet Open House

Why SGOCO Group (SGOC) Stock Is Skyrocketing Today

NEW YORK (TheStreet) -- Shares of SGOCO Group Ltd. (SGOC) are climbing higher by 82.72% to $2.96 in mid-morning trading on Thursday, after the company announced it launched a new online sales platform on JD.com (JD) , to help accelerate its delivery of high quality products and services.

The China-based company, which is focused on product design, distribution and brand development in the country's flat-panel display market, said it has taken a "significant step" towards developing e-commerce through the deal and driving new growth opportunities, while expanding its customer base.

"By signing the new distribution agreement, SGOCO agrees to provide the best-priced, exclusive and competitive products to JD.com for online direct sales," the company said.

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Separately, TheStreet Ratings team rates SGOCO GROUP LTD as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SGOCO GROUP LTD (SGOC) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and poor profit margins."

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

  • SGOC's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.74, which clearly demonstrates the ability to cover short-term cash needs.
  • SGOCO GROUP LTD 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 not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, SGOCO GROUP LTD increased its bottom line by earning $0.49 versus $0.25 in the prior year.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 54.62%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 63.15% 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.
  • 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 Household Durables industry. The net income has significantly decreased by 62.7% when compared to the same quarter one year ago, falling from $3.15 million to $1.18 million.
  • You can view the full analysis from the report here: SGOC Ratings Report

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