Why Neonode (NEON) Plunged to a One-Year Low Today

NEW YORK (TheStreet) -- Neonode  (NEON) plunged to a one-year low of $3.91 on Monday after the sensing technology company reported first-quarter earnings that came up short of analysts' expectations.

The company reported a loss of 11 cents a share, worse than the Capital IQ Consensus Estimate of a loss of 8 cents a share. Revenue increased to $1 million from $0.55 million year over year but came up short of the Capital IQ Consensus Estimate of $1.2 million.

The stock was down 14.69% to $3.95 at 2:38 p.m.

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Separately, TheStreet Ratings team rates NEONODE INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate NEONODE INC (NEON) a SELL. This is driven by a few notable 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 Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 43.2% when compared to the same quarter one year ago, falling from -$2.13 million to -$3.05 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 Electronic Equipment, Instruments & Components industry and the overall market, NEONODE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has declined marginally to -$2.27 million or 6.06% 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 share price of NEONODE INC has not done very well: it is down 18.27% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
  • NEONODE INC's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NEONODE INC reported poor results of -$0.37 versus -$0.27 in the prior year. This year, the market expects an improvement in earnings (-$0.10 versus -$0.37).
  • You can view the full analysis from the report here: NEON Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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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