Mobile data traffic sharing marketplace uCloudlink Group (UCL - Get Rating) recently announced that it has entered into a definitive agreement with YA II PN, Ltd., to issue and sell convertible debentures in a principal amount of $5 million and intends to use the net proceeds for general corporate purposes. The company also expects total revenues for the fourth quarter of 2021 to be between $17.50 million and $18 million, representing a 2.9% to 5.9% year-over-year increase.

However, the stock has lost 14.1% over the past month and 36.6% over the past three months to close yesterday’s trading session at $1.70. In addition, it is currently trading 87.8% below its all-time high of $13.95, which it hit on April 26, 2021. Also, analysts expect its EPS to remain negative in fiscal 2022. So, UCL’s near-term prospects look uncertain.

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

Lower-Than-Industry Valuation

In terms of forward EV/S, UCL’s 0.30x is 87.5% lower than the industry average of 2.39x. Likewise, its forward P/S of 0.65x is 60.6% lower than the industry average of 1.66x.

Top Line Growth Doesn’t Translate into Bottom Line Improvement

For the fiscal third quarter ended September 30, 2021, UCL’s total revenues surged 7.4% year-over-year to $19.30 million. However, its total assets came in at $97.25 million for the period ended September 30, 2021, compared to $24.87 million for the period ended December 31, 2020. The company’s adjusted EBITDA loss grew 8% year-over-year to $5.40 million. Also, its adjusted net loss came in at $6 million, representing a 5.3% year-over-year increase.

Low Profitability

In terms of trailing-12-month CAPEX/Sales, UCL’s 1.71% is 54.7% lower than the industry average of 3.77%. Likewise, its trailing-12-month gross profit margin of 29.67% is 42% lower than the industry average of 51.16%. Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA are negative compared to the industry averages of 9.87%, 4.29%, and 3.31%, respectively.

POWR Ratings Don’t Indicate Enough Upside

UCL has an overall rating of C, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

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

Moreover, the stock has a C grade for Momentum, consistent with its 71.8% loss over the past six months and 86.9% decline over the past year.

UCL is ranked #38 out of 52 stocks in the Industrial – Building Materials industry. Click here to access all of UCL’s ratings.

Bottom Line

UCL is currently trading below its 50-day and 200-day moving averages of $2.42 and $5.74, respectively, indicating a downtrend. So, it could be wise to wait for a better entry point in the stock.

UCL shares were unchanged in after-hours trading Wednesday. Year-to-date, UCL has declined -74.96%, versus a -11.16% 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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