Why Arotech (ARTX) Stock Is Down Today

NEW YORK (TheStreet) -- Arotech (ARTX) was falling -6.7% to $3.51 Friday after announcing the pricing of a 2.86 million share public offering.

The company announced it will price the 2.86 million share offering at $3.50 a share. The underwriters of the offering have a 30-day option to buy up to an additional 429,000 shares.

Arotech expects gross proceeds of about $10 million from the offering. The company plans to use the net proceeds for general corporate purposes including repayment of debt, funding research, development and product manufacturing, acquisitions, investments, working capital, and capital expenditures.

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TheStreet Ratings team rates AROTECH CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate AROTECH CORP (ARTX) 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 impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

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

  • AROTECH CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AROTECH CORP turned its bottom line around by earning $0.13 versus -$0.14 in the prior year. This year, the market expects an improvement in earnings ($0.17 versus $0.13).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 151.0% when compared to the same quarter one year prior, rising from $0.40 million to $1.01 million.
  • Net operating cash flow has increased to -$1.52 million or 14.05% when compared to the same quarter last year. Despite an increase in cash flow, AROTECH CORP's cash flow growth rate is still lower than the industry average growth rate of 44.19%.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Aerospace & Defense industry and the overall market, AROTECH CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for AROTECH CORP is currently lower than what is desirable, coming in at 34.16%. Regardless of ARTX's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.53% trails the industry average.
  • You can view the full analysis from the report here: ARTX 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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