Dot Hill Systems (HILL) Extends Sell-Off Through Monday

NEW YORK (TheStreet) -- After a steep post-earnings sell-off last week, Dot Hill Systems (HILL) is continuing to drop over Monday.

By late afternoon, shares had tumbled 17.2% to $3.75. Trading volume of 3.6 million was more than triple its three-month daily average.

On Friday, the company filed a Form 8-K with the SEC detailing the compensatory arrangements for president and CEO Dana Kammersgard and SVP and CFO Hanif Jamal.

The performance-based cash bonus will be determined based upon the completion of certain financial targets for non-GAAP revenue and operating profit with each metric weighted at 50%.

For fiscal 2014, Kammersgard and Jamal's bonuses will be equal to 100% and 65% of their base salaries, respectively.

The company's Compensation Committee also approved stock options for the executives: 260,000 for Kammersgard and 106,000 for Jamal.

Last week, the company gave up 15% despite beating analysts' estimates in its fourth quarter. The Longmont, Colo.-based business reported net income of 7 cents a share, a penny higher than Thomson Reuters' averaged estimates. Revenue climbed 29% year over year to $59.7 million.

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TheStreet Ratings team rates DOT HILL SYSTEMS CORP as a Buy with a ratings score of B-. The team has this to say about their recommendation:

"We rate DOT HILL SYSTEMS CORP (HILL) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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, impressive record of earnings per share growth, compelling growth in net income and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins."

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

  • The revenue growth came in higher than the industry average of 4.7%. Since the same quarter one year prior, revenues rose by 33.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although HILL's debt-to-equity ratio of 0.04 is very low, it is currently higher than that of the industry average. To add to this, HILL has a quick ratio of 1.56, which demonstrates the ability of the company to cover short-term liquidity needs.
  • DOT HILL SYSTEMS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DOT HILL SYSTEMS CORP turned its bottom line around by earning $0.10 versus -$0.18 in the prior year. This year, the market expects an improvement in earnings ($0.25 versus $0.10).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Computers & Peripherals industry. The net income increased by 144.1% when compared to the same quarter one year prior, rising from -$5.02 million to $2.21 million.
  • Powered by its strong earnings growth of 150.00% and other important driving factors, this stock has surged by 290.83% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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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