Why Recon Technology (RCON) Hit a One-Year High Today

NEW YORK (TheStreet) -- Recon Technology  (RCON) hit a one-year high of $6.32 as of 3:35 p.m. EST on Thursday after the Chinese oilfield services provider announced its second-quarter earnings results.

Recon reported revenue of $7.6 million, a 0.6% increase year over year. Gross profit rose 17.9% to $2.7 million, while gross margin increased to 35.7% from 30.5%. Earnings per diluted share were 23 cents, which marked a 2.8% year-over-year increase.

Non-GAAP net income increased 24.3% to $1.5 million, while non-GAAP diluted EPS was 36 cents.

TheStreet Ratings team rates RECON TECHNOLOGY LTD as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate RECON TECHNOLOGY LTD (RCON) 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, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."

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

  • The revenue growth came in higher than the industry average of 8.1%. Since the same quarter one year prior, revenues rose by 30.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RCON's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, RCON has a quick ratio of 1.83, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 47.26% is the gross profit margin for RECON TECHNOLOGY LTD which we consider to be strong. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, RCON's net profit margin of 0.42% significantly trails the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, RECON TECHNOLOGY LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$1.30 million or 3523.68% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: RCON Ratings Report

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