Why Netlist (NLST) Stock Is Gaining Today

NEW YORK (TheStreet) -- Netlist (NLST) was gaining 21.4% to $1.25 Monday after the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office issued a final decision in the reexamination of U.S. Pat. No. 7,532,537.

The court denied Inphi's request for a hearing, reaffirming its decision to uphold the validity of Netlists' 60 claims in the patent reexamination. The company's clams in the '537 patent are related to the concepts of load reduction and rank multiplication, integral parts of Netlists's design of LRDIMMs at DDR3 and DDR4.

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TheStreet Ratings team rates NETLIST INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NETLIST INC (NLST) a SELL. This is driven by a few notable 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. Among the areas we feel are negative, one of the most important has been poor profit margins."

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

  • The gross profit margin for NETLIST INC is currently lower than what is desirable, coming in at 32.38%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, NLST's net profit margin of -28.82% significantly underperformed when compared to 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. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, NETLIST INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.89, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has significantly increased by 629.31% to $0.31 million when compared to the same quarter last year. In addition, NETLIST INC has also vastly surpassed the industry average cash flow growth rate of -2.20%.
  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 25.60%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.Regarding the future course of this stock, we feel that the risks involved in investing in NLST do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • You can view the full analysis from the report here: NLST 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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