Ocean Power Technologies (OPTT) Is Today's Perilous Reversal Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Ocean Power Technologies ( OPTT) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Ocean Power Technologies as such a stock due to the following factors:

  • OPTT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $25.6 million.
  • OPTT has traded 364,822 shares today.
  • OPTT is down 7.7% today.
  • OPTT was up 32.5% yesterday.

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More details on OPTT:

Ocean Power Technologies, Inc. engages in the development and commercialization of proprietary systems that generate electricity by harnessing the renewable energy of ocean waves primarily in the United States, Europe, Asia, and Australia.

The average volume for Ocean Power Technologies has been 383,200 shares per day over the past 30 days. Ocean has a market cap of $28.0 million and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.88 and a short float of 6.6% with 0.12 days to cover. Shares are up 84% year-to-date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ocean Power Technologies as a sell. 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 ratings report include:
  • 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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