NEW YORK (TheStreet) -- TeleCommunicationSystems (TSYS) stock is soaring by 12.41% to $4.93 in mid-morning trading on Monday, after the company announced it was being acquired by Comtech Telecommunications (CMTL).
Comtech will buy the Annapolis, MD-based wireless communication company for $5 per share, or $430.8 million, the companies announced today.
The companies' combined revenue is worth about $671.4 million.
"Our customers will benefit from greater resources and more diverse product offerings, and our employees will benefit from being part of a larger more diversified company," TeleCommunication Systems CEO Maurice Tose said in a statement.
Additionally, the acquisition will provide Comtech with entry into commercial markets, such as the public safety market, which has a growing need for updated emergency 911 systems, the company said.
Comtech stock is down by 8.28% to $20.48 in mid-morning trading on Monday.
Separately, TheStreet Ratings team rates TELECOMMUNICATION SYS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate TELECOMMUNICATION SYS INC (TSYS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 15.7%. Since the same quarter one year prior, revenues slightly increased by 6.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- TELECOMMUNICATION SYS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TELECOMMUNICATION SYS INC continued to lose money by earning -$0.03 versus -$0.99 in the prior year. This year, the market expects an improvement in earnings ($0.31 versus -$0.03).
- 36.29% is the gross profit margin for TELECOMMUNICATION SYS INC which we consider to be strong. Regardless of TSYS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TSYS's net profit margin of 2.98% is significantly lower than the industry average.
- 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. When compared to other companies in the Software industry and the overall market, TELECOMMUNICATION SYS INC's return on equity is below that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.19 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, TSYS has managed to keep a strong quick ratio of 1.89, which demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: TSYS
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.