Rada Electronics Industries (RADA) Is Today's Perilous Reversal Stock

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.

Trade-Ideas LLC identified Rada Electronics Industries ( RADA) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Rada Electronics Industries as such a stock due to the following factors:

  • RADA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $24.5 million.
  • RADA has traded 80,946 shares today.
  • RADA is down 3.5% today.
  • RADA was up 6.3% yesterday.

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More details on RADA:

RADA Electronic Industries Ltd., a defense electronics contractor, is engaged in the development, manufacture, and sale of defense electronics to various air forces and companies worldwide.

The average volume for Rada Electronics Industries has been 1.4 million shares per day over the past 30 days. Rada has a market cap of $26.0 million and is part of the services sector and wholesale industry. Shares are up 85.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rada Electronics Industries as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and poor profit margins.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 2.55 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.42, which clearly demonstrates the inability to cover short-term cash needs.
  • The gross profit margin for RADA ELECTRONIC INDS is currently lower than what is desirable, coming in at 31.66%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.96% trails 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, RADA ELECTRONIC INDS's return on equity significantly trails that of both the industry average and the S&P 500.
  • RADA ELECTRONIC INDS reported significant earnings per share improvement 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, RADA ELECTRONIC INDS reported poor results of -$0.29 versus -$0.22 in the prior year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income increased by 141.1% when compared to the same quarter one year prior, rising from -$0.94 million to $0.38 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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