NEW YORK (TheStreet) -- Shares of Recon Technology (RCON) - Get Recon Technology Ltd. Report were gaining 22.3% to $2.02 on heavy trading volume after the oil services company announced it received contract (subcontractor) qualification from Jianghan Oilfield Construction Engineering Company (JOCEC), a subsidiary of China Petroleum & Chemical (SNP) - Get China Petroleum & Chemical Corporation Report.
The qualification is valid for one year starting June 4, 2015, and is extendable on a yearly basis. Recon is now qualified as a general contractor (subcontractor) to "participate in certain construction and engineering projects at JOCEC ranging from the expansion and renovation of existing facilities to the construction of new facilities," according to the company.
The company also announced that it secured a contract with JOCEC worth about RMB 550,000.
"The Qualification, combined with the entry permit awarded by JOCEC earlier this year, clears the path for our increasing presence at JOCEC and sets the stage for a broader and deeper relationship with Sinopec's subsidiaries, that collectively have contributed 19.6% of our total revenues in fiscal year 2014,"Chairman and CEO Shenping Yin said.
About 2.1 million shares of Recon technology were traded by 12:09 p.m. Wednesday, above the company's average trading volume of about 33,000 shares a day.
TheStreet Ratings team rates RECON TECHNOLOGY LTD as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate RECON TECHNOLOGY LTD (RCON) a SELL. This is driven by a number of negative factors, 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 disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, RECON TECHNOLOGY LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$0.86 million or 570.32% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Looking at the price performance of RCON's shares over the past 12 months, there is not much good news to report: the stock is down 59.81%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Energy Equipment & Services industry average. The net income has decreased by 9.8% when compared to the same quarter one year ago, dropping from $0.96 million to $0.87 million.
- RCON, with its very weak revenue results, has greatly underperformed against the industry average of 1.7%. Since the same quarter one year prior, revenues plummeted by 55.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: RCON Ratings Report