NEW YORK (TheStreet) -- Shares of WPCS International (WPCS) were gaining 11.5% to $1.65 with heavy trading volume on Monday after the communications services company discussed how many new contracts it won in the second quarter of fiscal 2016.
WPCS said that it won $4.7 million in new contracts in the fiscal second quarter that ended on October 31, 2015.
"Following this positive news is the fact that we now start Q3 with a deeper operations, sales, business development and acquisitions team focused exclusively on identifying and creating opportunities that we fully expect will profitably drive the top line," Interim CEO Sebastian Giordano said in a statement.
About 1.5 million shares of WPCS were traded by 10:28 a.m. Monday, above the company's average trading volume of about 369,000 shares a day.
TheStreet Ratings team rates WPCS INTERNATIONAL INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
We rate WPCS INTERNATIONAL INC (WPCS) a SELL. This is driven by several weaknesses, 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 disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 IT Services industry and the overall market, WPCS INTERNATIONAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for WPCS INTERNATIONAL INC is rather low; currently it is at 22.78%. Regardless of WPCS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, WPCS's net profit margin of 2.44% is significantly lower than the industry average.
- WPCS'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 90.85%, 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.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the IT Services industry average, but is greater than that of the S&P 500. The net income increased by 104.9% when compared to the same quarter one year prior, rising from -$2.24 million to $0.11 million.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 27.2%. Since the same quarter one year prior, revenues fell by 26.4%. 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: WPCS