Why Mitek Systems (MITK) Stock Is Up Today

NEW YORK (TheStreet) -- Mitek Systems (MITK) was gaining 44.3% to $3.42 Thursday after settling a lawsuit with the USAA.

The two companies agreed to settle all pending litigation with neither one making a payment or admitting liability. As part of the agreement the USAA will move to dismiss its claims against Mitek which include misappropriation of trade secrets, breach of contract, fraud, and inequitable conduct.

Mitek will move to dismiss its claims against USAA including trade defamation and Lanham Act violations, the company also agreed to not sue USAA for patent infringement.

The USAA will retain its license to use Mitek's Quick Strokes, Quick FX Pro, and Image Score software.

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

"We rate MITEK SYSTEMS INC (MITK) a SELL. This is driven by some concerns, 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 weak operating cash flow and generally disappointing historical performance in the stock itself."

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

  • Net operating cash flow has significantly decreased to $0.22 million or 73.51% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • MITK's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 56.86%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market, MITEK SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for MITEK SYSTEMS INC is currently very high, coming in at 89.48%. Regardless of MITK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MITK's net profit margin of -35.04% significantly underperformed when compared to the industry average.
  • MITK has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.93, which clearly demonstrates the ability to cover short-term cash needs.
  • You can view the full analysis from the report here: MITK Ratings Report

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