Why iPass (IPAS) Stock Is Surging Today

NEW YORK (TheStreet) -- Shares of iPass  (IPAS) surged 30.7% to $1.49 in afternoon trading Tuesday one day after the company announced it had begun to explore strategic alternatives that could increase stockholder value.

iPass president and CEO Evan Kaplan said in a statement the performance of the company's Open Mobile business and the sale of its Unity Managed Network Services led to the decision to explore the strategic alternatives. The company said it does not plan to comment further on the process until the board of directors makes a transaction or concludes the exploration.

iPass provides Wi-Fi connectivity services to enterprises, telecommunications carriers, service providers and device manufacturers.

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More than 1.4 million shares had changed hands as of 12:35 p.m., compared to the average volume of 204,470.

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

"We rate IPASS INC (IPAS) a SELL. This is driven by a number of negative factors, 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 disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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

  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market, IPASS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$4.95 million or 1086.65% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • IPAS'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 37.57%, 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.
  • IPASS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, IPASS INC reported poor results of -$0.21 versus -$0.06 in the prior year. For the next year, the market is expecting a contraction of 19.0% in earnings (-$0.25 versus -$0.21).
  • The revenue fell significantly faster than the industry average of 19.9%. Since the same quarter one year prior, revenues fell by 12.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: IPAS Ratings Report

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