NEW YORK (TheStreet) -- Shares of E2open (EOPN) were gaining 39.7% to $8.53 Thursday after the cloud-based software company announced it reached an agreement to be acquired by Insight Venture Partners for about $273 million.
Insight Venture Partners will pay $8.60 a share in cash to acquire E2open, representing a 41% premium over the company's Wednesday closing price of $6.11.
The deal is expected to close sometime in the first quarter of fiscal 2016. E2open will become a private company after the deal closes.
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"After a comprehensive evaluation and review of strategic alternatives designed to enhance shareholder value, we are confident that this agreement represents a favorable outcome for our shareholders, providing them with immediate, substantial value," E2open President and CEO Mark Woodward said. "Furthermore, we are excited about the prospect of partnering with Insight Venture Partners, a firm with an established track record and deep domain expertise in software."
TheStreet Ratings team rates E2OPEN INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate E2OPEN INC (EOPN) 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, weak operating cash flow, 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 Internet Software & Services industry. The net income has decreased by 22.8% when compared to the same quarter one year ago, dropping from -$7.38 million to -$9.07 million.
- Net operating cash flow has decreased to -$9.22 million or 14.95% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Looking at the price performance of EOPN's shares over the past 12 months, there is not much good news to report: the stock is down 74.39%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
- E2OPEN INC's earnings per share declined by 10.7% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, E2OPEN INC reported poor results of -$0.95 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings (-$0.61 versus -$0.95).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, E2OPEN INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: EOPN Ratings Report