United Time Technology Co., Ltd. (UTME - Get Rating) is a Shenzhen, China-based low-cost mobile device manufacturing company. The company listed 3.75 million shares on the Nasdaq stock exchange in April 2021, priced at $4 each. It raised $15 million in gross proceeds through the offering.

The stock opened at $11.40 on its first trading session on April 6 last year, 185% higher than its initial pricing. In addition, the stock hit its $107.33 all-time high the next day. Shares of UTME have since declined 93.6%.

Nevertheless, UTME has been gaining traction lately, despite no new corporate governance news to support this momentum. The stock has gained 28% in price over the past month and has become one of the most popular penny stocks. Its upward trajectory has attracted meme investors also because the stock is increasingly being discussed in the Reddit forum r/pennystocks.

Here is what could shape UTME’s performance in the near term:

Poor Growth Story

UTME’s revenues have declined at a 13.2% rate per annum over the past three years. The company’s tangible book value and total assets both declined at a 9.7% rate per annum over this period. While UTME’s trailing-12-month revenues grew 27.9% year-over-year, its trailing-12-month tangible book value and total assets fell at a 40.9% rate each versus the same period last year.

Bleak Financials

UTME’s trailing-12-month revenues stand at $37.68 million. Its gross profit amounted to $2.77 million, translating to a 7.36% margin. However, the company’s trailing-12-month gross profit margin is 85.2% lower than the 49.54% industry average. UTME’s trailing-12-month operating loss and net loss stood at $1.53 million and $2.54 million, respectively. Its loss per share came in at $0.56.

Negative Profit Margins

UTME’s trailing-12-month net income margin is negative 6.73%, while its trailing-12-month EBITDA margin is negative 2.45%. In addition, the company’s trailing-12-month levered free cash flow margin is negative 1.88%.

POWR Ratings Reflect Bleak Prospects

UTME has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

UTME has a D grade of D for Value, Growth, and Quality. The stock’s negative 2.74 EV/EBITDA multiple justifies the Value grade. In addition, UTME’s poor growth history and negative profit margins justify the Growth and Quality grades.

Among the 72 stocks in the D-rated Consumer Goods industry, UTME is ranked #64.

Beyond what I have stated above, view UTME ratings for Momentum, Sentiment, and Stability here.

Bottom Line

The company’s trailing-12-month operating cash outflows stand at $384,740. Given its $5.77 million trailing-12-month total debt, UTME’s negative cash flows raise concerns regarding its debt and interest repayment capabilities and ability to fund its working capital expenses. Furthermore, with negative profit margins, we think UTME is best avoided now.

How Does United Time Technology (UTME) Stack Up Against its Peers?

While UTME has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Ennis, Inc. (EBF - Get Rating), Acco Brands Corporation (ACCO - Get Rating), and Petco Health and Wellness Company, Inc. (WOOF - Get Rating), which have a B (Buy) rating.

UTME shares were trading at $2.42 per share on Wednesday afternoon, down $0.13 (-5.10%). Year-to-date, UTME has declined -9.36%, versus a -3.21% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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