NEW YORK (TheStreet) -- Shares of Aeroflex Holding Corp. (ARX) are up 24.55% to $10.35 in pre-market trade after it was announced that the wireless communications firm entered into a merger agreement with U.K.-listed Cobham plc, a defense and aerospace company.
Under the terms of the transaction, Cobham will acquire Aeroflex for $10.50 per share in cash.
Total transaction value is approximately $1.46 billion, including the assumption of Aeroflex's net debt of $540 million as of March 31.
TheStreet Ratings team rates AEROFLEX HOLDING CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AEROFLEX HOLDING CORP (ARX) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income increased by 156.7% when compared to the same quarter one year prior, rising from -$9.39 million to $5.33 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- AEROFLEX HOLDING 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, AEROFLEX HOLDING CORP reported poor results of -$1.25 versus -$0.64 in the prior year. This year, the market expects an improvement in earnings ($0.62 versus -$1.25).
- The debt-to-equity ratio is very high at 2.29 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, ARX has managed to keep a strong quick ratio of 1.54, which demonstrates the ability to cover short-term cash needs.
- 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, AEROFLEX HOLDING CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: ARX Ratings Report