NEW YORK (TheStreet) -- Shares of lighting products manufacturer Cree (CREE) popped 5.02% to $36.63 in morning trading Thursday after Dutch electronics company Philips (PHG) garnered interest from several private equity groups for the majority of its lighting components business, according to Reuters.
Philips is putting the business up for sale as it turns its attention to higher-margin activities, Reuters reported. Groups interested in acquiring the business include Bain, CVC, CD&R, KKR and Onex. These groups made indicative offers earlier in the week that valued Philips' lighting components business in a range of 2.5 billion euros ($3.1 billion) to 3 billion euros (or approximately $3.75 billion).
The lighting business sale could be a positive indicator for Cree, which manufactures lighting products, LED components, and semiconductor products for power and radio-frequency applications.
Separately, TheStreet Ratings team rates CREE INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate CREE INC (CREE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 18.4%. Since the same quarter one year prior, revenues slightly increased by 9.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- CREE's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.58, which clearly demonstrates the ability to cover short-term cash needs.
- 40.37% is the gross profit margin for CREE INC which we consider to be strong. Regardless of CREE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CREE's net profit margin of 2.60% is significantly lower than the industry average.
- Net operating cash flow has significantly decreased to $13.28 million or 80.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.97%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 64.00% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, CREE is still more expensive than most of the other companies in its industry.
- You can view the full analysis from the report here: CREE Ratings Report