Why Netlist (NLST) Is Soaring Today

NEW YORK (TheStreet) -- Netlist (NLST) was rising 23.23% to $1.75 on Tuesday afternoon after the tech company announced a fourth-quarter loss that was narrower than analysts' expectations.

The loss for the quarter was $1.6 million, or 5 cents a share; analysts were expecting a loss of 8 cents a share. A year earlier, Netlist recorded a loss of $4.1 million, or 14 cents a share. Revenue was $7.7 million, beating the consensus estimate of $4.58 million. Revenue a year earlier was $6 million.

"Our 2013 results reflect substantial progress in the strategic transition of our business," said Netlist CEO C.K. Hong in the company's statement. "In the fourth quarter we posted a significant improvement in year-over-year results, primarily due to sizeable increases in demand for our NVvault family of products combined with our ongoing efforts to control our costs. As we look out into 2014, we believe market requirements will accelerate for both our products and our IP."

TheStreet Ratings team rates NETLIST INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about its recommendation:

"We rate NETLIST INC (NLST) 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 disappointing return on equity, poor profit margins and weak operating cash flow."

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 Electronic Equipment, Instruments & Components industry and the overall market, NETLIST INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for NETLIST INC is rather low; currently it is at 17.42%. Regardless of NLST's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NLST's net profit margin of -73.23% significantly underperformed when compared to the industry average.
  • Net operating cash flow has declined marginally to -$3.05 million or 2.31% when compared to the same quarter last year. Despite a decrease in cash flow NETLIST INC is still fairing well by exceeding its industry average cash flow growth rate of -20.67%.
  • The revenue fell significantly faster than the industry average of 3.7%. Since the same quarter one year prior, revenues fell by 32.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • NLST's debt-to-equity ratio of 0.61 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that NLST's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.41 is high and demonstrates strong liquidity.
  • You can view the full analysis from the report here: NLST Ratings Report

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