NEW YORK (TheStreet) -- Capstone Turbine (CPST) - Get Capstone Turbine Corporation Report stock is tumbling Thursday after the company announced a secondary stock offering of just under 18.83 million shares.
By midmorning, shares had dropped 10.6% to $1.84.
The turbine manufacturer said it had entered into an underwriting agreement to sell its common stock at $1.70 a share, amassing gross proceeds of around $32 million and net proceeds of approximately $30.2 million. The company said the shares were allocated to a single institutional investor.
Proceeds are intended to be used for general working capital and other corporate purposes.
The offering is expected to close around May 6.
Cowen and Company and FBR & Co. are acting as the book-running managers, while Craig-Hallum Capital Group will act as co-manager of the offering.
TheStreet Ratings team rates CAPSTONE TURBINE CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate CAPSTONE TURBINE CORP (CPST) 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. Among the areas we feel are negative, one of the most important has been poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for CAPSTONE TURBINE CORP is rather low; currently it is at 21.30%. Regardless of CPST's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CPST's net profit margin of -5.91% significantly underperformed when compared to 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. Compared to other companies in the Electrical Equipment industry and the overall market, CAPSTONE TURBINE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- CAPSTONE TURBINE CORP reported flat earnings per share in the most recent quarter. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, CAPSTONE TURBINE CORP's EPS of -$0.07 remained unchanged from the prior years' EPS of -$0.07. This year, the market expects an improvement in earnings (-$0.05 versus -$0.07).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Electrical Equipment industry average. The net income increased by 51.1% when compared to the same quarter one year prior, rising from -$4.48 million to -$2.19 million.
- Compared to its closing price of one year ago, CPST's share price has jumped by 146.22%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in CPST do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
- You can view the full analysis from the report here: CPST Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.