India Globalization Capital (IGC) Stock Drops Off After Wednesday Surge

NEW YORK (TheStreet) -- India Globalization Capital  (IGC) declined Thursday after the stock soared 60% on Wednesday.

The stock actually hit a 52-week high of $2.34 shortly after the market opened, but it was down 10% to $1.80 at 11:22 a.m. More than 8.6 million shares had changed hands, which easily surpassed the average volume of 556,466.

The stock surged Wednesday after Indian president Pranab Mukherjee appointed Narendra Modi as the new Prime Minister of the nation. Modi will succeed Manmohan Singh, whose Congress party suffered its worst defeat in history in India's recent general elections. Mukherjee will administer the oath of office and secrecy to Modi on May 26.

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India Globalization Capital is a materials and infrastructures company that supplies and trades  iron ore and leases construction equipment. It also constructs roads and highways and supplies rock aggregate.

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

"We rate INDIA GLOBALIZATION CAPITAL (IGC) 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 unimpressive growth in net income, 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 Construction & Engineering industry. The net income has significantly decreased by 199.7% when compared to the same quarter one year ago, falling from $0.31 million to -$0.31 million.
  • Net operating cash flow has significantly decreased to -$0.45 million or 130.14% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 61.34%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 140.00% compared to the year-earlier 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.
  • INDIA GLOBALIZATION CAPITAL 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, INDIA GLOBALIZATION CAPITAL continued to lose money by earning -$0.20 versus -$3.10 in the prior year. For the next year, the market is expecting a contraction of 10.0% in earnings (-$0.22 versus -$0.20).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Construction & Engineering industry and the overall market, INDIA GLOBALIZATION CAPITAL'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: IGC Ratings Report

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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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