CynergisTek, Inc. (CTEK - Get Rating) provides cyber security, privacy, and compliance services in the United States. It recently strengthened its service portfolio by partnering with GroupSense to provide enhanced and proactive cyber-surveillance and incident response services. The company also announced two six-figure Vendor Security Management contract renewals.

The stock has lost 32.3% over the past six months and 44.7% over the past year to close yesterday’s trading session at $1.30. In addition, it is currently trading 54.4% below its 52-week high of $2.85, which it hit on June 9, 2021. The company’s weak financials and profitability make the stock’s near-term prospects look bleak.

Here’s what could influence CTEK’s performance in the upcoming months:

Disappointing Financials

For the fiscal third quarter ended September 30, 2021, CTEK’s net revenue declined 15% year-over-year to $3.83 million. The company’s operating loss for the quarter increased 50.5% year-over-year to $2.52 million. In comparison, its non-GAAP adjusted EBITDA loss came in at $0.63 million, compared to $0.76 million in the prior-year period. Its non-GAAP adjusted EBITDA loss per share came in at $0.05, compared to $0.07 in the year-ago period.

Low Profitability

In terms of trailing-12-month CAPEX/Sales, CTEK’s 0.52% is 88.1% lower than the industry average of 4.38%. Likewise, its trailing-12-month gross profit margin of 35.48% is 37.6% lower than the industry average of 56.84%. Moreover, the stock’s trailing-12-month EBIT margin and EBITDA margin are negative compared to the industry averages of 1.29% and 5.32%, respectively.

Unfavorable Analyst Estimates

Analysts expect CTEK’s EPS to decrease 37.5% in the current quarter and 425% in the current year. Also, its EPS is expected to remain negative in the current quarter and year.

POWR Ratings Reflect Bleak Prospects

CTEK has an overall rating of D, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. CTEK has a D grade for Quality, in sync with its lower-than-industry profitability ratios.

The stock has a C grade for Stability, consistent with its beta of 1.25. In addition, CTEK also has a C grade for Growth. This is justified as analysts expect its EPS to decline in the near term.

CTEK is ranked #66 out of 80 stocks in the Technology – Services industry. Click here to access CTEK’s Sentiment, Momentum, and Value ratings.

Bottom Line

CTEK is currently trading below its 50-day and 200-day moving averages of $1.36 and $1.72, respectively, indicating a downtrend. Moreover, it could keep losing in the near term due to its weak financials and growth prospects. So, it is best avoided now.

How Does CynergisTek (CTEK) Stack Up Against its Peers?

While CTEK has an overall POWR Rating of D, you might want to consider investing in the following Technology – Services stocks with an A (Strong Buy) rating: NetScout Systems, Inc. (NTCT), PC Connection, Inc. (CNXN), and Sanmina Corporation (SANM).

CTEK shares were unchanged in after-hours trading Wednesday. Year-to-date, CTEK has declined -7.64%, versus a -8.28% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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