Why Arctic Cat (ACAT) Stock Is Lower Today

NEW YORK (TheStreet) -- Arctic Cat (ACAT) stock is moving lower Monday after the surprise announcement of its CEO's exit. In a statement, the company said Claude Jordan would step down as chairman and CEO, effective immediately. Former CEO and current board member Chris Twomey has been named as interim CEO. 

"Claude and the board have mutually decided this is the right time, however, for new executive leadership at the company. It makes sense to set up the leadership team that will take the company forward to a successful future, as we enter a new fiscal year," Twomey said in the statement. 

By late afternoon, shares had plummeted 9.1% to $33.90.

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TheStreet Ratings team rates ARCTIC CAT INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ARCTIC CAT INC (ACAT) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 28.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Leisure Equipment & Products industry. The net income increased by 69.5% when compared to the same quarter one year prior, rising from -$5.08 million to -$1.55 million.
  • ACAT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.84 is somewhat weak and could be cause for future problems.
  • ARCTIC CAT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. Despite the past stability of earnings, the consensus estimate anticipates a weakening in earnings. During the past fiscal year, ARCTIC CAT INC increased its bottom line by earning $2.87 versus $2.86 in the prior year. For the next year, the market is expecting a contraction of 16.4% in earnings ($2.40 versus $2.87).
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