NEW YORK (TheStreet) -- Shares of Solazyme (SZYM) were gaining 22.1% to $3.92 on heavy trading volume Tuesday after the chemical company announced new strategic agreements with Flotek Industries (FTK) - Get Report.

Under the new agreement, Solazyme and Flotek will commercialize and market Flocapso, an advanced drilling fluid additive that combines Flotek's Complex nano-Fluid technology and Solazyme's Encapso lubricant. Flocapso allows oil companies to use water-based fluids in well which previously required oil-based products, according to the two companies.

Solazyme and Flotek will continue developing Flocapso chemistries under the new agreements, and will work cooperatively to market the product worldwide.

About 4.3 million shares of Solazyme were traded by 2:22 p.m. following the announcement, above the company's average trading volume of about 854,000 shares a day.

TheStreet Ratings team rates SOLAZYME INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate SOLAZYME INC (SZYM) a SELL. This is driven by several 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 disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself, deteriorating net income and generally high debt management risk."

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

  • 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 Oil, Gas & Consumable Fuels industry and the overall market, SOLAZYME INC'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 -$38.67 million or 116.33% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 2.32 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 9.16, which shows the ability to cover short-term cash needs.
  • Looking at the price performance of SZYM's shares over the past 12 months, there is not much good news to report: the stock is down 72.18%, 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.
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 34.6% when compared to the same quarter one year ago, falling from -$33.34 million to -$44.87 million.
  • You can view the full analysis from the report here: SZYM Ratings Report

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