Why Zhone Technologies (ZHNE) Stock Is Soaring Today

NEW YORK (TheStreet) -- Zhone Technologies  (ZHNE) soared Friday after it named James Norrod its new President and CEO.

Norrod also joins the board, effective immediately. Mory Ejabat will stay on as Executive Chairman.

"The Board and I have complete confidence that Jim is the right person to be our next CEO," Ejabat said in a company statement. "Jim's 25-year career as a CEO has been marked by outstanding performance, and he has demonstrated remarkable talent and excellent judgment in all of his endeavors. As Zhone's new CEO, Jim will manage the day-to-day operations while I will continue to provide strategic oversight."

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The stock was up 30.29% to $3.57 at 11:49 a.m. More than 5.4 million shares had changed hands, compared to the average volume of 317,444.

Separately, TheStreet Ratings team rates ZHONE TECHNOLOGIES INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate ZHONE TECHNOLOGIES INC (ZHNE) 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 revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."

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

  • ZHNE's revenue growth has slightly outpaced the industry average of 2.4%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Although ZHNE's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. To add to this, ZHNE has a quick ratio of 1.75, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 38.29% is the gross profit margin for ZHONE TECHNOLOGIES INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ZHNE's net profit margin of 1.05% significantly trails the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Communications Equipment industry and the overall market, ZHONE TECHNOLOGIES INC's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$0.14 million or 121.14% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: ZHNE 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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