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NEW YORK (TheStreet) -- Shares of Rally Software Development Corp. (RALY) are skyrocketing by 43.67% to $19.41 on heavy volume at the start of trading on Thursday morning, after the cloud-based solutions provider announced it is being acquired by CA Technologies (CA) for $19.50 per share, valuing the transaction at approximately $480 million.

"In a world driven by software, the powerful combination of Rally and CA will help our combined customers to better navigate changing markets, improve performance and deliver value faster - while accelerating the pace of disruption and developing a competitive advantage through technology," Rally CEO Tim Miller said in a statement announcing the merger.

The deal has been unanimously approved by the boards of both companies and is expected to close in CA Technologies' fiscal 2016 second quarter.

"Rally is a leading provider of Agile development software and services, with offerings that complement and expand CA's strengths in the areas of DevOps and Management Cloud. Every developer dreams of creating truly transformative software that responds to a business challenge extremely quickly. Joining forces with Rally makes this dream a possibility for millions of developers worldwide, and in turn opens up the possibility of a whole new range of experiences driven by software," CA Technologies CEO Mike Gregoire said in the same statement.

So far today, about 3.55 million shares of Rally Software have exchanged hands as compared to its average daily volume of 129,000 shares. 

Shares of CA Technologies are lower by 0.17% to $31.12 this morning.

Separately, TheStreet Ratings team rates RALLY SOFTWARE DEV CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate RALLY SOFTWARE DEV CORP (RALY) a SELL. This is driven by a few notable 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 43.1% when compared to the same quarter one year ago, falling from -$6.28 million to -$8.99 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, RALLY SOFTWARE DEV CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • In its most recent trading session, RALY has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • RALLY SOFTWARE DEV CORP's earnings per share declined by 34.6% 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, RALLY SOFTWARE DEV CORP reported poor results of -$1.34 versus -$0.84 in the prior year. This year, the market expects an improvement in earnings (-$0.84 versus -$1.34).
  • The gross profit margin for RALLY SOFTWARE DEV CORP is currently very high, coming in at 76.12%. Regardless of RALY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RALY's net profit margin of -36.59% significantly underperformed when compared to the industry average.
  • You can view the full analysis from the report here: RALY Ratings Report