Why Clean Diesel Technologies (CDTI) Shares Are Falling Today

NEW YORK (TheStreet) -- Clean Diesel Technologies (CDTI) was falling 12.4% to $3.69 Monday after posting a larger-than-expected loss in the fourth quarter.

In its fourth quarter results CDTi posted loss of 27 cents a share, missing analysts' expectations of a loss of 6 cents a share by 21 cents. Revenue grew 22.6% from the year-ago quarter to $15.2 million. Analysts surveyed by Thomson Reuters estimated revenue of $14.5 million for the quarter.

"We are pleased with CDTi's overall results for the fourth quarter. We achieved growth in our external Catalyst division sales in excess of 23% and 22% in our Heavy Duty Diesel Systems division," CEO and CFO of CDTi Nikhil Mehta said in a press release. Mehta went on to say that revenue growth in the quarter was mostly driven by catalyst sales to Honda (HMC).

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TheStreet Ratings team rates CLEAN DIESEL TECHNOLOGIES as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CLEAN DIESEL TECHNOLOGIES (CDTI) a SELL. This is based on several weak investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow and poor profit margins."

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

  • The debt-to-equity ratio of 1.47 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, CDTI has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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 Chemicals industry and the overall market, CLEAN DIESEL TECHNOLOGIES'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 -$0.08 million or 104.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for CLEAN DIESEL TECHNOLOGIES is currently lower than what is desirable, coming in at 32.36%. Regardless of CDTI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CDTI's net profit margin of -7.67% significantly underperformed when compared to the industry average.
  • CDTI, with its decline in revenue, underperformed when compared the industry average of 14.1%. Since the same quarter one year prior, revenues slightly dropped by 1.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: CDTI 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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