Why Digital Power Corp (DPW) Stock Is Surging Today

NEW YORK (TheStreet) --Digital Power Corp (DPW) was gaining 22.4% to $1.53 Monday after winning a $2 million defense export order.

The company secured the $2 million order from the Republic of Korea to provide uninterruptible power supply (UPS) systems for Military Afloat Reach and Sustainability tankers. The tankers will be built by Daewoo Shipbuilding and Marine Engineering. Each of the four tankers requires a total of eight UPS systems of various ratings.

"After nine months of hard work by our Republic of Korea partner, C&A Electric, and us, we are pleased to have secured this important contract," managing director of Digital Power Limited Jake Moir said in a press release. "This order will be a major part of our forward order book for the next two years and provides us with a platform to develop additional new products for customers worldwide. Our defense business continues to grow with customers in markets that include Spain, France, Australia, India and now South Korea."

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

"We rate DIGITAL POWER CORP (DPW) a SELL. This is driven by several 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 feeble growth in its earnings per share, deteriorating net income and disappointing return on equity."

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

  • DIGITAL POWER CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, DIGITAL POWER CORP reported poor results of -$0.09 versus -$0.05 in the prior year.
  • 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 Electrical Equipment industry. The net income has significantly decreased by 247.7% when compared to the same quarter one year ago, falling from $0.11 million to -$0.16 million.
  • 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 Electrical Equipment industry and the overall market, DIGITAL POWER CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • DPW, with its decline in revenue, slightly underperformed the industry average of 6.0%. Since the same quarter one year prior, revenues slightly dropped by 6.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 40.40% is the gross profit margin for DIGITAL POWER CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -7.75% is in-line with the industry average.
  • You can view the full analysis from the report here: DPW 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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