NEW YORK (TheStreet) -- Shares of RADA Electronic Industries (RADA) were falling 33.5% to $1.22 on heavy trading volume Friday after the defense electronics company priced the 6,910,569 ordinary shares in its public offer.
RADA priced the 6,910,569 ordinary shares in the offering at $1.23 a share. The company granted the underwriters an option to buy up to an additional 1,036,585 ordinary shares to cover any over-allotments connected to the offering.
The company said it expects to use the net proceeds from the offering to repay debt and to make a payment to an affiliate of its controlling shareholder "for expenses incurred in the course of financing negotiations."
About 2.9 million shares of RADA were traded by 9:55 a.m. Friday, well above the company's average trading volume of about 231,000 shares a day.
TheStreet Ratings team rates RADA ELECTRONIC INDS as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate RADA ELECTRONIC INDS (RADA) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 591.8% when compared to the same quarter one year ago, falling from $0.16 million to -$0.78 million.
- The debt-to-equity ratio is very high at 3.72 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.35, which clearly demonstrates the inability to cover short-term cash needs.
- The gross profit margin for RADA ELECTRONIC INDS is rather low; currently it is at 17.41%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -21.29% is significantly below that of the industry average.
- 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. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, RADA ELECTRONIC INDS's return on equity significantly trails that of both the industry average and the S&P 500.
- RADA, with its decline in revenue, underperformed when compared the industry average of 1.9%. Since the same quarter one year prior, revenues fell by 31.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: RADA Ratings Report