NEW YORK (TheStreet) -- Shares of CollabRx (CLRX) were gaining 11% to $1.16 on heavy trading volume Thursday after the healthcare information services company announced it will merge with Medytox Solutions (MMMS).
Under the merger agreement CollabRx shareholders will own a 10% stake in the combined company, with Medytox Solutions shareholders owning the remaining 90% of the new company.
CollabRx will operate as a wholly owned subsidiary of the combined company following the merger. Current CollabRx CEO Thomas Mika will serve as CEO of the subsidiary and as executive chairman of the new company.
"I cannot be more enthusiastic about this outcome for all CollabRx stakeholders, including our shareholders, customers, team members and advisors," Mika said in a statement. "CollabRx will continue its mission to better inform decision-making in cancer within a high-growth, profit-oriented company, while being able to support several exciting Medytox initiatives in precision medicine."
About 1.8 million shares of CollabRx were traded by 11:05 a.m. Thursday, above the company's average trading volume of about 1.2 million shares a day.
TheStreet Ratings team rates COLLABRX INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
"We rate COLLABRX INC (CLRX) a SELL. This is driven by multiple 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. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Health Care Technology industry average, but is greater than that of the S&P 500. The net income has decreased by 12.1% when compared to the same quarter one year ago, dropping from -$1.00 million to -$1.12 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 Health Care Technology industry and the overall market, COLLABRX 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 -$0.94 million or 124.58% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- CLRX'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 69.38%, 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.
- Despite currently having a low debt-to-equity ratio of 0.41, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.05 is sturdy.
- You can view the full analysis from the report here: CLRX Ratings Report