Ocean Power (OPTT) Extends Tuesday's Rally

NEW YORK (TheStreet) -- After soaring 52.8% over Tuesday, Ocean Power Technologies (OPTT) is continuing to gain well into Wednesday's session.

By early afternoon, shares of the microcap have added 24.6% to $4.40. Trading volume of 18.2 million is more than 12 times its three-month average daily volume.

On Tuesday, Lockheed Martin (LMT) announced a partnership with the alternative energy supplier to develop the world's largest project harnessing wave energy.

The project will be developed off the coast of Victoria, Australia and upon its completion as early as 2018 will produce enough power for 10,000 homes.

The project will use Ocean Power's technology which converts wave energy into clean energy via the bobbing movement of a buoy. The mechanical energy produced drives an electrical generator, which transmits power through an underwater cable.

OPTT Chart OPTT data by YCharts

TheStreet Ratings team rates OCEAN POWER TECHNOLOGIES INC as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate OCEAN POWER TECHNOLOGIES INC (OPTT) a SELL. This is driven by multiple 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 Electrical Equipment industry and the overall market, OCEAN POWER TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$3.41 million or 16.37% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, OCEAN POWER TECHNOLOGIES INC has marginally lower results.
  • The gross profit margin for OCEAN POWER TECHNOLOGIES INC is rather low; currently it is at 23.92%. Regardless of OPTT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, OPTT's net profit margin of -704.95% significantly underperformed when compared to the industry average.
  • In its most recent trading session, OPTT 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.
  • OPTT, with its very weak revenue results, has greatly underperformed against the industry average of 7.4%. Since the same quarter one year prior, revenues plummeted by 65.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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