Why American Superconductor (AMSC) Is Surging Today

NEW YORK (TheStreet) -- American Superconductor  (AMSC) was surging 16.02% to $2.10 on Wednesday afternoon after China's supreme court ruled in the company's favor in its two copyright-infringement cases against Sinovel Wind Group.

In 2011, American Superconductor brought four lawsuits against the Chinese wind turbine manufacturer that was once American Superconductor's largest customer. The suit claims that Sinovel violated sales contracts and stole AMSC's technology, and the company wants $1.2 billion in damages. Sinovel made up 70% of AMSC's total business in 2009 but ceased taking AMSC shipments in March 2011.

Sinovel wanted to move the two cases to arbitration, but the Supreme People's Court rejected this proposal and announced that the cases would be heard in court.

TheStreet Ratings team rates AMERICAN SUPERCONDUCTOR CP as a "sell" with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERICAN SUPERCONDUCTOR CP (AMSC) 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. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself."

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

  • AMSC's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 49.24%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electrical Equipment industry and the overall market, AMERICAN SUPERCONDUCTOR CP's return on equity significantly trails that of both the industry average and the S&P 500.
  • AMSC's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.79 is somewhat weak and could be cause for future problems.
  • 35.63% is the gross profit margin for AMERICAN SUPERCONDUCTOR CP which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -40.93% is in-line with the industry average.
  • Net operating cash flow has significantly increased by 79.52% to -$3.59 million when compared to the same quarter last year. In addition, AMERICAN SUPERCONDUCTOR CP has also vastly surpassed the industry average cash flow growth rate of -13.62%.
  • You can view the full analysis from the report here: AMSC Ratings Report

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