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Why American Superconductor (AMSC) Stock Is Down Today

NEW YORK (TheStreet) -- American Superconductor (AMSC - Get Report) was falling -6.9% to $1.62 Thursday following a ruling in its case against former Indian wind turbine technology licensee Ghodawat Energy.

The Arbitration Tribunal for the International Court of Arbitration in Paris ruled that AMSC's Austrian subsidiary, AMSC Austria, breached a license agreement with Ghodawat. The court awarded Ghodawat about $11 million in damages and costs, including interest.

Massachusetts-based AMSC expects to record a charge of about $10.5 million in the fiscal second quarter as a result of the ruling. The company adjusted its GAAP net loss estimate for the quarter to less than $26 million, or 33 cents a share.

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TheStreet Ratings team rates AMERICAN SUPERCONDUCTOR CP as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERICAN SUPERCONDUCTOR CP (AMSC) 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 unimpressive growth in net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself."

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 Electrical Equipment industry. The net income has significantly decreased by 28.6% when compared to the same quarter one year ago, falling from -$10.51 million to -$13.52 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Electrical Equipment industry and the overall market, AMERICAN SUPERCONDUCTOR CP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for AMERICAN SUPERCONDUCTOR CP is rather low; currently it is at 17.48%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -115.56% is significantly below that of the industry average.
  • AMSC'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 27.58%, 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.
  • The revenue fell significantly faster than the industry average of 6.4%. Since the same quarter one year prior, revenues fell by 49.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: AMSC Ratings Report
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