SolarCity (SCTY) Weak In Early Morning Trading

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.

Trade-Ideas LLC identified SolarCity ( SCTY) as a pre-market laggard candidate. In addition to specific proprietary factors, Trade-Ideas identified SolarCity as such a stock due to the following factors:

  • SCTY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $324.7 million.
  • SCTY traded 19,112 shares today in the pre-market hours as of 8:18 AM.
  • SCTY is down 2.2% today from yesterday's close.

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More details on SCTY:

SolarCity Corporation designs, installs, and sells or leases solar energy systems to residential and commercial customers, and government entities in the United States. Currently there are 3 analysts that rate SolarCity a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for SolarCity has been 5.2 million shares per day over the past 30 days. SolarCity has a market cap of $5.8 billion and is part of the technology sector and electronics industry. Shares are up 6.5% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SolarCity as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, poor profit margins, generally high debt management risk and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • Net operating cash flow has significantly decreased to -$8.43 million or 113.02% 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 SOLARCITY CORP is rather low; currently it is at 20.82%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 56.43% has significantly outperformed against the industry average.
  • The debt-to-equity ratio of 1.08 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, SCTY has managed to keep a strong quick ratio of 1.89, which demonstrates the ability to cover short-term cash needs.
  • SOLARCITY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SOLARCITY CORP reported poor results of -$0.75 versus -$0.56 in the prior year. For the next year, the market is expecting a contraction of 244.0% in earnings (-$2.58 versus -$0.75).
  • Compared to other companies in the Electrical Equipment industry and the overall market, SOLARCITY CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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