One Reason Digital Ally (DGLY) Stock Is Surging Today

NEW YORK (TheStreet) -- Shares of Digital Ally (DGLY) are surging, up 5.48% to $22.15 in late morning trading Friday on heavy volume, as the maker of law enforcement video and audio recording products continues to gain after U.S. Attorney General Holder said Cleveland Police officers "engage in excessive force far too often, and [it] is neither isolated, nor sporadic," in the midst of an investigation by the U.S. Justice Department, Reuters reported.

The Cleveland investigation launched after a series of troubling high-profile police use-of-force incidents that brought appeals from city leaders for a federal investigation, Reuters added.

The Lenexa, KS-based company soared over 45% on Tuesday, and another 17.19% yesterday after President Obama announced a plan to set aside up to $75 million to buy body cameras for police officers across the country.

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There have been racially charged protests recently throughout the U.S. after the two grand jury decisions to not indict officers who killed an unarmed black men in Ferguson, MO, and another in New York City.

About 1.33 million shares of Digital Ally have changed hands as of 11:00 a.m. in New York, compared to the daily average of 981,404 shares.

Digital Ally develops, manufactures and markets advanced video surveillance products for law enforcement, homeland security and commercial applications.

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

"We rate DIGITAL ALLY INC (DGLY) 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 feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally high debt management risk."

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

  • DIGITAL ALLY INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, DIGITAL ALLY INC reported poor results of -$1.14 versus -$0.99 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 1376.1% when compared to the same quarter one year ago, falling from -$0.07 million to -$0.99 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, DIGITAL ALLY 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 -$0.60 million or 459.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • DGLY's debt-to-equity ratio of 0.75 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.47 is very low and demonstrates very weak liquidity.
  • You can view the full analysis from the report here: DGLY Ratings Report

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