NEW YORK (TheStreet) -- Shares of ZBB Energy Corp. (ZBB) are jumping by 17.53% to $1.14 on very heavy volume in mid-morning trading on Friday, after the developer and manufacturer of distributed energy storage solutions entered into a strategic partnership with Solar Power Inc. (SOPW) , in which ZBB Energy will supply 40MW of systems to the solar project developer over the next four years.

So far today, 2.21 million shares of ZBB Energy have exchanged hands as compared to its average daily volume of 267,000 shares.

As part of the deal the two companies have executed a securities purchase agreement valued at $33.4 million, consisting of a combination of newly issued common stock and convertible preferred stock of ZBB Energy.

Under the terms of the SPA Solar Power will acquire 8 million shares of ZBB Energy common stock for approximately $5.4 million and 28,048 shares of ZBB Energy Series C Convertible stock for about $28 million.

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"This proposed partnership between Solar Power and ZBB Energy is all about accelerating global solar penetration through the marriage of solar plus storage. Energy storage systems are becoming vital to PV system expansion worldwide due to a number of factors, and we believe that ZBB's leading technology will help Solar Power become an early-mover in capturing this huge global opportunity," said Xiaofeng Peng, Chairman of Solar Power.

Separately, TheStreet Ratings team rates ZBB ENERGY CORP as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ZBB ENERGY CORP (ZBB) a SELL. This is driven by several 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 unimpressive growth in net income, 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:

  • 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 Electrical Equipment industry. The net income has significantly decreased by 56.4% when compared to the same quarter one year ago, falling from -$2.16 million to -$3.38 million.
  • The gross profit margin for ZBB ENERGY CORP is rather low; currently it is at 22.92%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -1121.59% is significantly below that of the industry average.
  • Net operating cash flow has decreased to -$3.00 million or 23.78% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • ZBB's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 61.67%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • 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, ZBB ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ZBB Ratings Report