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NEW YORK (TheStreet) -- NeoStem (NBS) shares are up 5.8% to $6.77 in trading on Monday.

The increase follows the company's announcement of its plans to acquire California Stem Cell Inc.

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"As with any acquisition, the company has carefully evaluated the value proposition of this transaction as it relates to all our constituents. As such, I can say with confidence that we believe the acquisition of CSC, along with its Phase 3 ready asset and impressive technology platform, will prove to be a crucial time of meaningful growth for us when we look back in a year's time," said CEO Robin Smith in a blog post Monday.

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

"We rate NEOSTEM INC (NBS) 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. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and poor profit margins."

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 Biotechnology industry and the overall market, NEOSTEM 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 -$6.61 million or 95.85% 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 gross profit margin for NEOSTEM INC is currently lower than what is desirable, coming in at 29.57%. Regardless of NBS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NBS's net profit margin of -244.69% significantly underperformed when compared to the industry average.
  • In its most recent trading session, NBS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • The revenue fell significantly faster than the industry average of 15.1%. Since the same quarter one year prior, revenues fell by 16.4%. 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: NBS Ratings Report

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