NEW YORK (TheStreet) -- Dealertrack Technologies (TRAK) shares are jumping 57.67% to $62.91 in early market trading on Monday after the web-based software solutions and services provider to the automotive industry agreed to be purchased by privately held Cox Automotive for $4 billion.
The deal is for $63.25 per share and is expected to close in the third quarter this year.
Cox Automotive is the owner of automotive research company Kelley Blue Book and is the largest wholesale vehicle auction company in the U.S. with over 100 locations worldwide.
"This is a great investment in our customers and in the auto industry. We have long admired the Dealertrack team and its highly respected brands. Integrating our platforms will be a big step forward in our shared vision of providing open, cost-effective and efficient solutions for dealers, lenders, manufacturers and consumers," said Cox president Sandy Schwartz.
Cox Automotive is a unit of Cox Enterprises and employs approximately 24,000 people worldwide.
Dealertrack is based in New Hyde Park, NY and has about 4,000 employees.
TheStreet Ratings team rates DEALERTRACK TECHNOLOGIES INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate DEALERTRACK TECHNOLOGIES INC (TRAK) 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, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TRAK's very impressive revenue growth greatly exceeded the industry average of 5.8%. Since the same quarter one year prior, revenues leaped by 59.1%. 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.
- Net operating cash flow has significantly increased by 74.96% to -$23.25 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 41.44%.
- The gross profit margin for DEALERTRACK TECHNOLOGIES INC is rather high; currently it is at 58.71%. Regardless of TRAK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TRAK's net profit margin of -8.99% significantly underperformed when compared to the industry average.
- 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 Internet Software & Services industry. The net income has significantly decreased by 95.2% when compared to the same quarter one year ago, falling from -$11.64 million to -$22.73 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, DEALERTRACK TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: TRAK Ratings Report