3 Stocks Pushing The Telecommunications Industry Lower

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.

The Telecommunications industry as a whole closed the day down 0.5% versus the S&P 500, which was up 0.1%. Laggards within the Telecommunications industry included Technical Communications ( TCCO), down 17.8%, Glowpoint ( GLOW), down 2.4%, Communications Systems ( JCS), down 1.8%, eOn Communications ( EONC), down 12.6% and DragonWave ( DRWI), down 1.6%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the industry lower today:

DragonWave ( DRWI) is one of the companies that pushed the Telecommunications industry lower today. DragonWave was down $0.02 (1.6%) to $1.26 on light volume. Throughout the day, 157,713 shares of DragonWave exchanged hands as compared to its average daily volume of 249,500 shares. The stock ranged in price between $1.24-$1.28 after having opened the day at $1.27 as compared to the previous trading day's close of $1.28.

DragonWave Inc. provides high-capacity packet microwave solutions that drive IP networks worldwide. Its carrier-grade point-to-point packet microwave systems transmit broadband voice, video and data to meet bandwidth requirements. The company's products are used for mobile network backhaul. DragonWave has a market cap of $71.6 million and is part of the technology sector. Shares are down 7.2% year-to-date as of the close of trading on Monday. Currently there are no analysts who rate DragonWave a buy, 1 analyst rates it a sell, and 3 rate it a hold.

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TheStreet Ratings rates DragonWave as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on DRWI go as follows:

  • 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 Communications Equipment industry and the overall market, DRAGONWAVE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for DRAGONWAVE INC is currently extremely low, coming in at 11.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -24.85% is significantly below that of the industry average.
  • Net operating cash flow has decreased to -$8.29 million or 34.50% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • DRWI's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 41.56%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • The revenue fell significantly faster than the industry average of 3.5%. Since the same quarter one year prior, revenues fell by 42.3%. 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: DragonWave Ratings Report

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At the close, Communications Systems ( JCS) was down $0.21 (1.8%) to $11.38 on heavy volume. Throughout the day, 19,112 shares of Communications Systems exchanged hands as compared to its average daily volume of 12,200 shares. The stock ranged in price between $11.10-$11.63 after having opened the day at $11.59 as compared to the previous trading day's close of $11.59.

Communications Systems, Inc., together with its subsidiaries, manufactures and sells modular connecting and wiring devices, digital subscriber line filters, structured wiring systems, and media and rate conversion products primarily in North America, Europe, the Middle East, and Africa. Communications Systems has a market cap of $97.8 million and is part of the technology sector. Shares are up 4.0% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Communications Systems as a hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from TheStreet Ratings analysis on JCS go as follows:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • JCS, with its decline in revenue, slightly underperformed the industry average of 3.5%. Since the same quarter one year prior, revenues slightly dropped by 8.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • COMMUNICATIONS SYSTEMS INC 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. During the past fiscal year, COMMUNICATIONS SYSTEMS INC swung to a loss, reporting -$0.11 versus $0.26 in the prior year.
  • 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 Communications Equipment industry. The net income has significantly decreased by 158.3% when compared to the same quarter one year ago, falling from $0.24 million to -$0.14 million.

You can view the full analysis from the report here: Communications Systems 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.

Glowpoint ( GLOW) was another company that pushed the Telecommunications industry lower today. Glowpoint was down $0.04 (2.4%) to $1.67 on light volume. Throughout the day, 10,849 shares of Glowpoint exchanged hands as compared to its average daily volume of 47,100 shares. The stock ranged in price between $1.65-$1.70 after having opened the day at $1.69 as compared to the previous trading day's close of $1.71.

Glowpoint has a market cap of $60.3 million and is part of the technology sector. Shares are up 23.2% year-to-date as of the close of trading on Monday.

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

Highlights from TheStreet Ratings analysis on GLOW go as follows:

You can view the full analysis from the report here: Glowpoint 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.

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