Why Control4 (CTRL) and Echelon (ELON) Are Soaring Today

Tickers in this article: CTRL ELON GOOG

NEW YORK (TheStreet) -- Control4 and Echelon spiked Tuesday following Google's $3.2 billion acquisition of smart thermostat maker Nest Labs.

Control4 jumped 38.4% to $25.65, and Echelon soared 303.4% to $3.04 following the news.

Control4 makes automation and control solution for connected homes, similar to Nest. The company's Home Controller product can manage devices including networked thermostats that compete with Nest as well as light switches, alarm panels, and security cameras. Control4 also makes devices that can control whole rooms of devices including TVs, DVD players, and audio receivers with a smartphone app.

Echelon makes control networks that connect energy meters for better data collection and monitoring.

ELON ChartELON data by YCharts

TheStreet Ratings team rates ECHELON CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate ECHELON CORP (ELON) 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 disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, ECHELON CORP'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 -$2.51 million or 179.15% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ELON has underperformed the S&P 500 Index, declining 11.84% from its price level of one year ago. 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.
  • ECHELON CORP has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, ECHELON CORP's EPS of -$0.30 remained unchanged from the prior years' EPS of -$0.30. For the next year, the market is expecting a contraction of 43.3% in earnings (-$0.43 versus -$0.30).
  • The revenue fell significantly faster than the industry average of 0.9%. Since the same quarter one year prior, revenues fell by 38.0%. 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: ELON Ratings Report