NEW YORK (TheStreet) -- DragonWave (DRWI) spiked 18.2% to $1.88 on Wednesday following the announcement of a new deal with Gogo(GOGO) - Get Report.

DragonWave said it was selected as a microwave solutions provider for Gogo's ongoing expansion. The microwave radio system producer will provide the backhaul connectivity needed for Gogo's in-flight Wi-Fi systems. DragonWave's Horizon Quantum and Horizon Compact+ radios will be used to link Gogo's remote towers back to wired networks.

This is just the latest deal between the two companies, as Gogo already uses DragonWave products to help make its service possible. In a press release, DragonWave President and CEO Peter Allen said, "Probably the best compliment one gets from a customer is repeat business, and we're committed to help Gogo succeed as they expand their business of connecting passengers to the Internet at 30,000 feet."

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

"We rate DRAGONWAVE INC (DRWI) a SELL. This is driven by some concerns, 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, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."

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 Communications Equipment industry and the overall market, DRAGONWAVE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for DRAGONWAVE INC is currently extremely low, coming in at 11.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -24.85% is significantly below that of the industry average.
  • Net operating cash flow has decreased to -$8.29 million or 34.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • DRWI has underperformed the S&P 500 Index, declining 19.99% from its price level of one year ago. 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.
  • The revenue fell significantly faster than the industry average of 22.4%. Since the same quarter one year prior, revenues fell by 42.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: DRWI Ratings Report