Why Giga-tronics (GIGA) Stock Is Exploding Today

NEW YORK (TheStreet) -- Giga-tronics  (GIGA) exploded Monday after the tech company confirmed it had reached a multi-year agreement with a major aerospace company to produce a variant of its high-performance fast tuning YIG filters for a third aircraft platform.

The company received approximately $6.9 million in orders as part of the agreement, and expects another multi-year order later this year for approximately $10 million.

The stock was up 130.58% to $2.79 at 11:51 a.m.

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

"We rate GIGA-TRONICS INC (GIGA) 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 disappointing return on equity, generally disappointing historical performance in the stock itself and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes 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 Electronic Equipment, Instruments & Components industry and the overall market, GIGA-TRONICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite currently having a low debt-to-equity ratio of 0.55, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that GIGA's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.56 is low and demonstrates weak liquidity.
  • GIGA has underperformed the S&P 500 Index, declining 20.04% from its price level of one year ago. 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.
  • GIGA, with its decline in revenue, underperformed when compared the industry average of 9.3%. Since the same quarter one year prior, revenues fell by 13.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 39.36% is the gross profit margin for GIGA-TRONICS INC which we consider to be strong. Regardless of GIGA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GIGA's net profit margin of -21.01% significantly underperformed when compared to the industry average.
  • You can view the full analysis from the report here: GIGA 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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