3 Computer Hardware Stocks Pushing Industry Growth

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 three major indices are trading lower today with the Dow Jones Industrial Average ( ^DJI) trading up 20 points (0.1%) at 16,715 as of Tuesday, May 13, 2014, 4:20 PM ET. The NYSE advances/declines ratio sits at 1,363 issues advancing vs. 1,697 declining with 123 unchanged.

The Computer Hardware industry as a whole closed the day down 0.3% versus the S&P 500, which was unchanged. Top gainers within the Computer Hardware industry included Overland Storage ( OVRL), up 1.7%, Xplore Technologies ( XPLR), up 3.3%, Crossroads Systems ( CRDS), up 7.0%, Lantronix ( LTRX), up 4.5% and China TechFaith Wireless Comm Tech ( CNTF), up 2.4%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

Lantronix ( LTRX) is one of the companies that pushed the Computer Hardware industry higher today. Lantronix was up $0.08 (4.5%) to $1.85 on light volume. Throughout the day, 23,043 shares of Lantronix exchanged hands as compared to its average daily volume of 137,500 shares. The stock ranged in a price between $1.78-$1.86 after having opened the day at $1.78 as compared to the previous trading day's close of $1.77.

Lantronix, Inc. designs, develops, markets, and sells networking and communications products with a focus on the convergence of mobility with machine-to-machine systems. The company provides solutions that enable machines, devices, and sensors to be securely accessed, managed, and controlled. Lantronix has a market cap of $26.2 million and is part of the technology sector. Shares are up 13.1% year-to-date as of the close of trading on Monday. Currently there is 1 analyst who rates Lantronix a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Lantronix as a sell. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity.

Highlights from TheStreet Ratings analysis on LTRX go as follows:

  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Communications Equipment industry and the overall market, LANTRONIX INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • LTRX, with its decline in revenue, slightly underperformed the industry average of 3.5%. Since the same quarter one year prior, revenues slightly dropped by 4.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • The gross profit margin for LANTRONIX INC is rather high; currently it is at 51.94%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.12% is in-line with the industry average.
  • LANTRONIX INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, LANTRONIX INC continued to lose money by earning -$0.19 versus -$0.28 in the prior year. This year, the market expects an improvement in earnings (-$0.03 versus -$0.19).

You can view the full analysis from the report here: Lantronix Ratings Report

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At the close, Crossroads Systems ( CRDS) was up $0.13 (7.0%) to $1.98 on light volume. Throughout the day, 74,461 shares of Crossroads Systems exchanged hands as compared to its average daily volume of 113,600 shares. The stock ranged in a price between $1.80-$2.04 after having opened the day at $1.80 as compared to the previous trading day's close of $1.85.

Crossroads Systems has a market cap of $21.6 million and is part of the technology sector. Shares are down 23.2% year-to-date as of the close of trading on Monday.

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Highlights from TheStreet Ratings analysis on CRDS go as follows:

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

Overland Storage ( OVRL) was another company that pushed the Computer Hardware industry higher today. Overland Storage was up $0.05 (1.7%) to $3.00 on heavy volume. Throughout the day, 82,977 shares of Overland Storage exchanged hands as compared to its average daily volume of 25,100 shares. The stock ranged in a price between $2.92-$3.14 after having opened the day at $2.95 as compared to the previous trading day's close of $2.95.

Overland Storage, Inc. provides unified data management and data protection solutions worldwide. Overland Storage has a market cap of $45.9 million and is part of the technology sector. Shares are down 39.2% year-to-date as of the close of trading on Monday. Currently there is 1 analyst who rates Overland Storage a buy, no analysts rate it a sell, and 1 rates it a hold.

TheStreet Ratings rates Overland Storage as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on OVRL go as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Computers & Peripherals industry. The net income has decreased by 1.0% when compared to the same quarter one year ago, dropping from -$4.27 million to -$4.32 million.
  • Net operating cash flow has decreased to -$3.76 million or 20.81% 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.
  • OVRL'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 53.95%, 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.
  • OVRL, with its decline in revenue, underperformed when compared the industry average of 4.2%. Since the same quarter one year prior, revenues fell by 15.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 37.53% is the gross profit margin for OVERLAND STORAGE INC which we consider to be strong. Regardless of OVRL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OVRL's net profit margin of -40.57% significantly underperformed when compared to the industry average.

You can view the full analysis from the report here: Overland Storage 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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