3 Stocks Driving The Telecommunications Industry Higher

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.

All three major indices traded up today with the Dow Jones Industrial Average ( ^DJI) trading up 121 points (0.7%) at 17,751 as of Wednesday, July 29, 2015, 4:20 PM ET. The NYSE advances/declines ratio sits at 2,248 issues advancing vs. 830 declining with 135 unchanged.

The Telecommunications industry as a whole closed the day up 0.9% versus the S&P 500, which was up 0.7%. Top gainers within the Telecommunications industry included B Communications ( BCOM), up 9.3%, Otelco ( OTEL), up 2.1%, Hong Kong Television Network ( HKTV), up 1.8%, Elephant Talk Communications ( ETAK), up 4.6% and Aware ( AWRE), up 2.4%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

Aware ( AWRE) is one of the companies that pushed the Telecommunications industry higher today. Aware was up $0.08 (2.4%) to $3.36 on heavy volume. Throughout the day, 58,255 shares of Aware exchanged hands as compared to its average daily volume of 21,300 shares. The stock ranged in a price between $3.16-$3.37 after having opened the day at $3.25 as compared to the previous trading day's close of $3.28.

Aware, Inc. provides software and services for the biometrics industry. The company's software products are used in government and commercial biometrics systems to identify or authenticate people. Aware has a market cap of $75.7 million and is part of the technology sector. Shares are down 27.8% year-to-date as of the close of trading on Tuesday. Currently there are no analysts who rate Aware a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Aware as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from TheStreet Ratings analysis on AWRE go as follows:

  • AWRE has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 16.11, which clearly demonstrates the ability to cover short-term cash needs.
  • AWARE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, AWARE INC increased its bottom line by earning $0.20 versus $0.16 in the prior year.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 41.81%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 75.00% compared to the year-earlier 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.
  • Net operating cash flow has significantly decreased to $0.01 million or 99.17% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

You can view the full analysis from the report here: Aware Ratings Report

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At the close, Elephant Talk Communications ( ETAK) was up $0.02 (4.6%) to $0.34 on light volume. Throughout the day, 103,591 shares of Elephant Talk Communications exchanged hands as compared to its average daily volume of 139,100 shares. The stock ranged in a price between $0.32-$0.36 after having opened the day at $0.32 as compared to the previous trading day's close of $0.32.

Elephant Talk Communications Corp. operates as mobile software defined network architecture vendor in Europe and internationally. It primarily provides mobile, fixed, and convergent telecommunications software services. Elephant Talk Communications has a market cap of $52.8 million and is part of the technology sector. Shares are down 60.9% year-to-date as of the close of trading on Tuesday. Currently there are 2 analysts who rate Elephant Talk Communications a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Elephant Talk Communications as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from TheStreet Ratings analysis on ETAK go as follows:

  • 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 Diversified Telecommunication Services industry and the overall market, ELEPHANT TALK COMM 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 -$2.53 million or 425.57% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ETAK'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 57.65%, 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 the current debt-to-equity ratio of 1.78, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.48 is very low and demonstrates very weak liquidity.
  • ETAK, with its decline in revenue, slightly underperformed the industry average of 3.6%. Since the same quarter one year prior, revenues slightly dropped by 6.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

You can view the full analysis from the report here: Elephant Talk Communications Ratings Report

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B Communications ( BCOM) was another company that pushed the Telecommunications industry higher today. B Communications was up $1.59 (9.3%) to $18.60 on average volume. Throughout the day, 1,037 shares of B Communications exchanged hands as compared to its average daily volume of 1,100 shares. The stock ranged in a price between $18.29-$18.78 after having opened the day at $18.29 as compared to the previous trading day's close of $17.01.

B Communications Ltd. provides various communications services for business and private customers in Israel. B Communications has a market cap of $534.9 million and is part of the technology sector. Shares are down 4.2% year-to-date as of the close of trading on Tuesday. Currently there are no analysts who rate B Communications a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates B Communications as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk.

Highlights from TheStreet Ratings analysis on BCOM go as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 120.8% when compared to the same quarter one year prior, rising from -$58.12 million to $12.11 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, B COMMUNICATIONS LTD has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • In its most recent trading session, BCOM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 debt-to-equity ratio is very high at 15.52 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, BCOM's quick ratio is somewhat strong at 1.20, demonstrating the ability to handle short-term liquidity needs.

You can view the full analysis from the report here: B Communications Ratings Report

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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.

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