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Shares of xG Technology, Inc. (NASDAQ:XGTI) are making a strong comeback as they have jumped 64.82% since bottoming out at $1.17 on Dec. 29, 2016. Meanwhile, due to an ongoing pressure which caused a decline of almost -4.46% in the past five days, the stock price is now up 42.96% so far on the year — still in strong territory. In this case, shares are down -94.43% from $27.6 , the 52-week high touched on May. 24, 2016, but are collecting gains at -85.95% for the past 12 months.
Is It Worth the Risk?
Brokerage houses, on average, are recommending investors to buy xG Technology, Inc. (XGTI)’s shares projecting a $3.5 target price. What do this target means? Price targets reflect what the analyst believes a stock will be worth four quarters into the future. Are investors supposed to sell when the stock hits the target? Price targets frequently change, depending on the outlook for a company’s earnings. Sometimes it may seem like it, but analysts don’t just pull their price targets out of thin air. Typically, they estimate what the company’s earnings and cash flow will be for the next couple of years, and then apply a ratio – such as a price-to-earnings ratio – to those estimates to determine what the future stock price should theoretically be.
Revenue Growth Rates
XGTI’s revenue has grown at an average annualized rate of about 113% during the past five years. However, the company’s most recent quarter increase of 933.3% looks attractive.
Comparing Profitability
While there are a number of profitability ratios that measure a company’s ability to generate profit from the sales or services it provides, one of the most important is the net profit margin. It tells us what percentage of revenue a company keeps after all its bills are paid. While the higher this number is, the better, there is no gold standard. That’s why this number shouldn’t be looked at in isolation, but should be compared to a company’s peer group as well as its sector. Currently, xG Technology, Inc. net profit margin for the 12 months is at -57.06%. Comparatively, the peers have a net margin 1.23%, and the sector’s average is 4.38%. In that light, it seems in weak position compared to its peers and sector.
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