Why Vringo (VRNG) Popped on Friday

NEW YORK (TheStreet) -- Vringo (VRNG) continued to gain in post-market trading after gaining 7.2% to $3.12 over Friday's session. After hours, the app software developer had added a further 3.2% to $3.22.

Earlier in the day, the company received a favorable damages ruling in a 2012 patent suit against Google (GOOG) and AOL (AOL). A Virginian court awarded Vringo $16.8 million in supplemental damages, $15.8 million of which will come from Google.

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

"We rate VRINGO INC (VRNG) 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 deteriorating net income and weak operating cash flow."

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 Software industry. The net income has significantly decreased by 238.0% when compared to the same quarter one year ago, falling from -$3.12 million to -$10.56 million.
  • Net operating cash flow has significantly decreased to -$6.42 million or 87.05% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • In its most recent trading session, VRNG 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.
  • VRINGO INC has improved earnings per share by 27.8% in the most recent quarter compared to the same quarter a year ago. For the next year, the market is expecting a contraction of 13.6% in earnings (-$0.50 versus -$0.44).
  • VRNG, with its very weak revenue results, has greatly underperformed against the industry average of 5.5%. Since the same quarter one year prior, revenues plummeted by 81.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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