Why Digital Power Corporation (DPW) Exploded to a One-Year High Today

NEW YORK (TheStreet) -- Digital Power Corporation  (DPW) soared more than 90% to a one-year high of $3.05 as of 11 a.m. on Wednesday after the company announced it had received a five-year contract from Israel Aerospace Industries.

Digital Power will provide its low-voltage power supply multiple outputs converter to IAI for the duration of the contract, which covers the manufacturing and delivery of the LVPS modules. IAI will use the LVPS to power the TAMAM Modular Azimuth Position System (TMAPS) navigation system, which the Israel Defense Forces (IDF) uses in tactical warfare.

The LVPS is designed to operate in battlefield scenarios in which jamming or other methods have disturbed GPS. It features a capability that should supply the TMAPS with continuous, stable power through multiple sources regardless of the operating conditions.

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TheStreet Ratings team rates DIGITAL POWER CORP as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate DIGITAL POWER CORP (DPW) a SELL. This is driven by several 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. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity."

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, DIGITAL POWER CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • 35.51% is the gross profit margin for DIGITAL POWER CORP which we consider to be strong. Regardless of DPW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DPW's net profit margin of -12.12% significantly underperformed when compared to the industry average.
  • DIGITAL POWER CORP has improved earnings per share by 42.9% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, DIGITAL POWER CORP swung to a loss, reporting -$0.05 versus $0.16 in the prior year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electrical Equipment industry. The net income increased by 45.8% when compared to the same quarter one year prior, rising from -$0.47 million to -$0.25 million.
  • This stock has increased by 129.20% over the past year, outperforming the rise in the S&P 500 Index during the same period. Despite the fact that the stock's value has already enjoyed nice gains in the past year, we feel that the risks surrounding an investment in this stock outweigh any potential future returns.
  • You can view the full analysis from the report here: DPW Ratings Report

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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.

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