Early Moves to Watch – MagneGas Corporation (NASDAQ:MNGA)
Shares of MagneGas Corporation (NASDAQ:MNGA) skyrocketed 47.45% in morning trade Friday, soon after a leading clean technology company in the renewable resources and environmental solutions industries, recently declared preliminary financial results for the second quarter ending June 30, 2017.
Ermanno Santilli, Chief Executive Officer of MagneGas, stated, “We practiced a 50.1% increase in metal cutting fuel revenue in the second quarter of 2017 as compared to the same period last year. This compares favorably the industry growth rate of just 2-3%. Our growth in this segment is mainly because of the successful expansion into two new markets, which have begun to deliver consistent and scaled revenues for the Company in 2017. We have implemented additional sales and marketing programs, which we expect will assist further drive our growth going forward. In addition, we are utilizing MagneGas2® as a key introductory product to penetrate large industrial clients. We then look to aggressively expand these relationships where we can profitably cross sell non-proprietary products. As an example of our success, our Sarasota, Florida location, opened in January of this year, is on pace to generate over $1 million in annualized revenue within the coming quarters. We look to replicate this success as we grow our Huntington, Indiana location, followed by additional locations planned in Florida in the coming quarters.”
“We have also initiated an aggressive cost reduction program. Apart From $1.6 million of non-cash stock compensation expenses, our SG&A reduced 35% quarter over quarter, and 57% contrast to Q4 2016. As a result, we see a clear path to profitability through continued organic growth, accretive acquisitions, reduction in our production costs, and careful administration of our expenses,” added Mr. Santilli.
“Through the introduction of butanol as a feedstock and further procedural and equipment improvements, our production rates have raised over 150% with a 50% reduction in production costs. We believe these enhancements, together with changes to improve the ease of use, should make our equipment more attractive for small and medium sized distributors looking to produce their own acetylene substitute. In addition, the lower fuel cost has the potential to further enhance our gross margins by reducing our feedstock costs. Preliminary gross margins raised 128 basis points to 45% for the second quarter of 2017 from 44% in the second quarter of 2016. We believe our margins will continue to improve over the coming quarters as we scale the production of our gas and reap the benefits of the lower production costs.”
“In June, we were awarded a grant from the United States Department of Agriculture (USDA) to accelerate commercialization of the Company’s plasma arc Venturi® sterilization system for the treatment of pathogens and nutrients found in animal biosolid wastes. We are now advancing a number of additional sterilization projects we have been developing in the U.S., Europe, Latin America and Asia. We are also making strides in the waste water industry. Last month, we declared that we received our first order for wastewater treatment, as part of a licensing agreement to produce units in Italy for waste water sterilization. This unit will be installed into a customized facility that will generate revenue through the treatment of landfill wastewater, which represents a large and underserved market because of stringent regulations. Following completion of this first project, we look forward to expanding our presence across Europe.”
“In July, we were awarded an important patent by the US Patent and Trademark Office related to use of our technology to increase the energy density of fuels or as an additive to current fuels. We believe there are numerous applications in the energy, transportation and space industries. We will continue to explore low cost proof of concept development and licensing opportunities. We also declared that we have filed a provisional patent application on our next-generation gasification system. The provisional patent application entails the use of a plasma arc in conjunction with certain fluids and powdered materials such as coal, plastics, and potentially the Company’s primary feedstock, butanol. We see broad market potential for this technology counting ‘clean coal’ applications, where we are exploring various grant opportunities.”
Scott Mahoney, Chief Financial Officer of MagneGas, commented, “Our executive team set forth a series of internal aims at the end of 2016. These aims centered on revenue growth, cost control, profitability, and productivity. We are now two full quarters into the execution of our plan, and we are happy to have clear data that supports our plan is now being successfully executed. We are well into the third quarter now, and we are excited to continue to focus on accelerated revenue growth, improved profitability, and the opportunity to deliver further value to our shareholders. We have a number of near term catalysts that we look to execute on, and we believe this will continue to drive the value proposition of our technology in the coming quarters.”
The stock is now trading at $0.72, exchanging hands with 5,911,227 shares contrast to its average daily volume of 332.17K shares.
Stock’s Performance Analysis (Weekly, Monthly & Year to Date):
The stock, as of recent close, has shown weekly upbeat performance of 6.52% which was maintained at -63.97% in 1-month period, and is down 89.21% in this year. The company has the market capitalization of $3.85M while its P/B ratio was 0.98. Institutional investors own 2.7% stake in the company while Beta factor, which is used to measure riskiness of the security, was -0.27.
Stock’s Technical Analysis:
In taking a look at technical levels, shares is trading -23.25% away from the 20-days simple moving average and -86.08% away from the 200-days simple moving average. Based on a recent bid, the stock is trading -94.37% away from its 52-week high and 22.5% away from its 52 week low.
Relative Strength Index (RSI):
The relative strength index (RSI) is a technical indicator used in the analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. The indicator should not be confused with relative strength.
The RSI is classified as a momentum oscillator, measuring the velocity and magnitude of directional price movements. Momentum is the rate of the rise or fall in price. The RSI computes momentum as the ratio of higher closes to lower closes: stocks which have had more or stronger positive changes have a higher RSI than stocks which have had more or stronger negative changes.
The RSI is most typically used on a 14-day timeframe, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. Shorter or longer timeframes are used for alternately shorter or longer outlooks. More extreme high and low levels—80 and 20, or 90 and 10—occur less frequently but indicate stronger momentum. After a recent check, MagneGas Corporation’s 14-day RSI is presently at 29.05.
Analysts’ Suggestions in the Limelight:
The stock received analysts’ mean target price of $3. This is the projected price level of a financial security stated by an investment analyst or advisor. Shareholders can make better decisions if they focus on target prices, which convey more information for evaluating the potential risk/reward profile of a stock. However, analysts’ mean recommendation for this stock stands at 2. Analyst recommendations as stated on FINVIZ are rated on a 1 to 5 scale. 1 is equivalent to a buy rating, 3 a hold rating, and 5 a sell rating. The consensus recommendation is the average rating on a stock by the analyst community.
