Trade-Ideas: Gogo (GOGO) Is Today's

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Gogo ( GOGO) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Gogo as such a stock due to the following factors:

  • GOGO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.4 million
  • GOGO has traded 163,138 shares today
  • GOGO is down 3.1% today
  • GOGO was up 6.1% yesterday

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More details on GOGO:

Gogo Inc., through its subsidiaries, provides aero communications services to the commercial and business aviation markets in the United States and internationally. The company operates three segments: Commercial Aviation North America, Commercial Aviation Rest of World, and Business Aviation. Currently there are four analysts that rate Gogo a buy, one analyst rates it a sell, and one rates it a hold.

The average volume for Gogo has been 848,500 shares per day over the past 30 days. Gogo has a market cap of $1.87 billion and is part of the technology sector and telecommunications industry. Shares are up 40.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Gogo as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity, generally high debt management risk and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Internet Software & Services industry average. The net income has decreased by 19.1% when compared to the same quarter one year ago, dropping from -$16.87 million to -$20.09 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 Internet Software & Services industry and the overall market, GOGO INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 4.12 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 3.00, which shows the ability to cover short-term cash needs.
  • GOGO INC's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, GOGO INC continued to lose money by earning -$0.99 versus -$1.32 in the prior year. For the next year, the market is expecting a contraction of 14.6% in earnings (-$1.14 versus -$0.99).
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

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