NEW YORK (TheStreet) -- Shares of JA Solar (JASO) were surging 11.8% to $9.03 on Friday after the solar energy company received a buyout proposal from Chairman and CEO Baofang Jin and his company, Jinglong Group.
In the proposal, Jin offered to acquire the company for $9.69 an American Depositary Share to bring JA Solar private. Each ADS represents five ordinary shares of the company.
JA Solar said it plans to form a special committee of independent directors to consider Jin's proposal. The company said it has not made any decisions yet, and that there is no assurance that a definitive offer will be made, or that any agreement will be offered.
About 2.2 million shares of JA Solar were traded by 9:54 a.m. Friday, above the company's average trading volume of about 1.8 million shares a day.
TheStreet Ratings team rates JA SOLAR HOLDINGS CO LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate JA SOLAR HOLDINGS CO LTD (JASO) 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 robust revenue growth, increase in net income and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- JASO's very impressive revenue growth greatly exceeded the industry average of 0.8%. Since the same quarter one year prior, revenues leaped by 53.7%. 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.
- The debt-to-equity ratio is somewhat low, currently at 0.78, 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 0.94 is somewhat weak and could be cause for future problems.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, JASO has underperformed the S&P 500 Index, declining 12.67% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for JA SOLAR HOLDINGS CO LTD is rather low; currently it is at 15.48%. Regardless of JASO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, JASO's net profit margin of 4.29% is significantly lower than the industry average.
- You can view the full analysis from the report here: JASO Ratings Report