Why Vitesse Semiconductor (VTSS) Stock Is Down Today

NEW YORK (TheStreet) -- Vitesse Semiconductor (VTSS) was falling -10.7% to $3.41 Thursday after pricing a public offering of common stock.

The chipmaker priced the public offering of 7,462,675 share of common stock at $3.35 a share. Vitesse granted the underwriters of the offering to buy an additional 1,119,401 shares to cover any over-allotments.

Vitesse expects net proceeds of about $23.2 million from the offering. The company will use the proceeds for working capital and general corporate purposes.

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TheStreet Ratings team rates VITESSE SEMICONDUCTOR CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate VITESSE SEMICONDUCTOR CORP (VTSS) a SELL. This is driven by a number of negative factors, 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 deteriorating net income, weak operating cash flow and generally high debt management risk."

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 Semiconductors & Semiconductor Equipment industry. The net income has decreased by 20.3% when compared to the same quarter one year ago, dropping from -$4.85 million to -$5.83 million.
  • Net operating cash flow has significantly decreased to -$0.04 million or 110.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 6.56 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, VTSS's quick ratio is somewhat strong at 1.04, demonstrating the ability to handle short-term liquidity needs.
  • Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, VITESSE SEMICONDUCTOR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • VITESSE SEMICONDUCTOR CORP has improved earnings per share by 23.1% 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, VITESSE SEMICONDUCTOR CORP reported poor results of -$0.58 versus -$0.07 in the prior year. This year, the market expects an improvement in earnings (-$0.17 versus -$0.58).
  • You can view the full analysis from the report here: VTSS 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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