NEW YORK (TheStreet) -- Shares of Gevo (GEVO - Get Report) were gaining 114.7% to $5.26 on heavy trading volume Thursday after the chemical company announced Alaska Airlines (ALK) will be a launch partner for its alcohol-based renewable jet fuel.
Alaska Airline will fly a demonstration flight using Gevo's biofuel in mid to late 2015 after the company received ASTM International certification. Gevo said it has been working through the ASTM process for six years so the fuel can be integrated into existing distribution infrastructure and onto commercial aircraft after it receives certification.
"A sustainable biofuels industry would help insulate airlines from fuel price spikes, enabling them to offer economical air travel while remaining profitable, while helping meet their environmental goals, and spur economic growth within and outside of aviation," Gevo CEO Dr. Patrick Gruber said in a statement.
About 38.2 million shares of Gevo were traded by 3:46 p.m. Thursday, well above the company's average trading volume of about 439,000 shares a day.
TheStreet Ratings team rates GEVO INC as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:
"We rate GEVO INC (GEVO) a SELL. This is based on several weak investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for GEVO INC is currently extremely low, coming in at 1.37%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, GEVO's net profit margin of -116.60% significantly underperformed when compared to the industry average.
- GEVO'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 83.76%, 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.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GEVO INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio is somewhat low, currently at 0.86, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.73 is somewhat weak and could be cause for future problems.
- Net operating cash flow has significantly increased by 58.35% to -$6.38 million when compared to the same quarter last year. In addition, GEVO INC has also vastly surpassed the industry average cash flow growth rate of -42.26%.
- You can view the full analysis from the report here: GEVO Ratings Report