Why KEMET (KEM) Stock Is Soaring Today

NEW YORK (TheStreet) -- Shares of KEMET Corp.  (KEM) are rising by 16.63% to $5.26 on Thursday after the company reported preliminary 2014 fourth quarter and fiscal year results.

The supplier of electronic components said net sales increased 8.2% to $215.8 million, from $199.5 million for the year ago quarter.

Nets sales for the 2014 fiscal year were $833.7 million versus $823.9 million from the fiscal year 2013.

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KEMET said non-U.S. adjusted net income improved to $0.4 million, or 1 cent per diluted share for the most recent quarter, compared to an adjusted net loss of -$8.3 million, or 18 cents per share from the 2014 fourth quarter.

For the fiscal year, the company reported a non-U.S. GAAP net loss from continuing operations was -$18.8 million, or 42 cents per basic and diluted share, compared to a net loss of -$23.2 million, or 51 cents per basic and diluted share for the 2013 fiscal year.

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

"We rate KEMET CORP (KEM) 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 generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and poor profit margins."

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

  • Currently the debt-to-equity ratio of 1.69 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, KEM maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.
  • 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 Electronic Equipment, Instruments & Components industry and the overall market, KEMET CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • KEM has underperformed the S&P 500 Index, declining 16.90% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The gross profit margin for KEMET CORP is rather low; currently it is at 23.84%. Regardless of KEM's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.80% trails the industry average.
  • KEMET 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KEMET CORP reported poor results of -$1.77 versus $0.00 in the prior year. This year, the market expects an improvement in earnings (-$0.47 versus -$1.77).
  • You can view the full analysis from the report here: KEM Ratings Report
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