Why Luna Innovations (LUNA) Stock Is Surging Today

NEW YORK (TheStreet) -- Luna Innovations  (LUNA) soared 48.22% to $2.25 in morning trading Tuesday off the strength of Rada Electronic Industries (RADA) , which reported second-quarter earnings Monday.

The Israeli company, which specializes in defense electronics, reported a 23% year-over-year revenue increase to $6.4 million from $5.2 million. Net income totaled $385,000, or 4 cents a share, compared to a net loss of $935,000 or 10 cents a share, in the same period in 2013.

Gross profit surged 164% year-over-year to $2.04 million from $0.8 million. Operating expenses ticked up 11% to $1.4 million from $1.3 million in the second quarter of 2013. Financial expenses fell 43% year-over-year to $262,000 from $459,000.

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Luna manufactures products for the medical, telecommunications, energy and defense markets.

More than 4 million LUNA shares had changed hands as of 9:58 a.m., which dwarfed the average volume of 39,483.

Separately, TheStreet Ratings team rates LUNA INNOVATIONS INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate LUNA INNOVATIONS INC (LUNA) 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. Among the areas we feel are negative, one of the most important has been weak operating cash flow."

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

  • Net operating cash flow has significantly decreased to -$1.68 million or 61.32% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 Professional Services industry and the overall market, LUNA INNOVATIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • LUNA INNOVATIONS INC has improved earnings per share by 42.9% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, LUNA INNOVATIONS INC reported poor results of -$0.31 versus -$0.19 in the prior year.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • 38.04% is the gross profit margin for LUNA INNOVATIONS INC 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 -17.49% is in-line with the industry average.
  • You can view the full analysis from the report here: LUNA Ratings Report

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