Why Acacia Research (ACTG) Stock Is Down Today

NEW YORK (TheStreet) -- Acacia Research (ACTG) was falling 7% to $15.87 Monday after missing analysts' expectations for earnings and revenue in the first quarter.

For the first quarter Acacia Research posted a loss of 11 cents a share, missing analysts' estimates of earnings of 5 cents a share by 16 cents. Revenue fell 83.6% to $12.58 million in the quarter. Analysts surveyed by Thomson Reuters expected revenue of $16.53 for the quarter.

In addition to its quarterly results Acacia Research declared a quarterly dividend of 12.5 cents a share, in line with its previous dividend. The dividend is payable on May 30 to all shareholders of record at the close of business on May 1.

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TheStreet Ratings team rates ACACIA RESEARCH CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ACACIA RESEARCH CORP (ACTG) a SELL. This is driven by multiple 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. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Professional Services industry. The net income has significantly decreased by 439.3% when compared to the same quarter one year ago, falling from $9.82 million to -$33.33 million.
  • 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 Professional Services industry and the overall market, ACACIA RESEARCH CORP'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 $1.31 million or 96.18% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.68%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 445.00% compared to the year-earlier 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.
  • ACACIA RESEARCH CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ACACIA RESEARCH CORP swung to a loss, reporting -$1.17 versus $1.28 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus -$1.17).
  • You can view the full analysis from the report here: ACTG 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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