Why Real Goods Solar (RSOL) Is Up Today

NEW YORK (TheStreet) -- Real Goods Solar (RSOL) rose 13.3% to $4.08 Thursday on news that Mercury Solar Systems shareholders agreed to a merger with a subsidiary of the solar power provider.

Real Good Solar will hold a special stockholders meeting on Jan. 14 to approve the merger with Mercury Solar Systems. The merger should help Real Goods Solar boost its commercial and residential solar businesses.

Along with the approval of the merger, Mercury Solar Systems recently announced that it established operations in Puerto Rico, and currently has several unspecified projects under development.

TheStreet Ratings team rates REAL GOODS SOLAR INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about its recommendation:

"We rate REAL GOODS SOLAR INC (RSOL) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 28.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 95.20% and other important driving factors, this stock has surged by 280.21% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • REAL GOODS SOLAR INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, REAL GOODS SOLAR INC reported poor results of -$1.76 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings (-$0.34 versus -$1.76).
  • The gross profit margin for REAL GOODS SOLAR INC is rather low; currently it is at 22.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -6.16% is significantly below that of the industry average.
  • Net operating cash flow has decreased to -$3.27 million or 23.80% 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.

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