Update (4:22 p.m. EST): Updated with closing price, day high and low prices, price change and volume information.

NEW YORK (TheStreet) -- DragonWave Inc.  (DRWI)  surged 23.24% to $1.75, up 33 cents from its previous close of $1.42, at the close of the trading day on Wednesday after the company announced the signing of a strategic sales agreement with Xi'an Potevio Communications.

The stock had a volume of 4,051,795, more than five times more than its average of 731,478. it hit a high of $1.81 and a low of $1.51 for the day.

DragonWave, which supplies packet microwave radio systems for mobile and access networks around the world, teams with Xi'an Potevio, an ICT subsidiary of China Potevio Corporation, in order to sell and distribute DragonWave services throughout China. Xi'an Potevio has made initial deliveries of Horizon Compact, all-outdoor radios to a major mobile services provider in China as part of the agreement. The company will also increase its marketing of Horizon and Harmony microwave radios.

"After much due diligence seeking the most reliable and efficient solutions to address the country's growing need for carrier grade microwave solutions, we've selected DragonWave for its advanced technology and proven performance," said Zhong Fu Sheng, the General Manager of Xi'an Potevio Communications in a statement. "The combined Horizon and Harmony portfolio allows us to address any number of deployment scenarios needed to advance and maintain exceptional service and to meet growing capacity demands across a broad range of markets."

TheStreet Ratings team rates DRAGONWAVE INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their 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 deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally high debt management risk."

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 Communications Equipment industry. The net income has significantly decreased by 836.6% when compared to the same quarter one year ago, falling from -$1.12 million to -$10.51 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 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 10.98%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -41.28% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$12.83 million or 2913.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite currently having a low debt-to-equity ratio of 0.45, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that DRWI's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.65 is low and demonstrates weak liquidity.
  • You can view the full analysis from the report here: DRWI Ratings Report