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Is CPS Technologies Corp. Positioned for a Major Breakout?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs

A groundbreaking new partnership in the electronics sector has significantly boosted CPS Technologies Corp., contributing to its stocks trading up by 15.17 percent on Thursday.

Highlighting the Key Developments

CPS Technologies has secured a significant $12M contract to deliver power module components for high-speed rail, wind turbines, and electric vehicles, with deliveries spanning over the next year.

Candlestick Chart

Live Update at 08:51:51 EST: On Thursday, October 31, 2024 CPS Technologies Corp. stock [NASDAQ: CPSH] is trending up by 15.17%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

CPS Technologies reported Q3 revenues of $4.2M, showcasing steady financial performance.

CPS tech prepares for upcoming earnings call scheduled for October 31, 2024, where more financial results will be shared.

Unpacking CPS Technologies Corp.’s Financials

In recent times, CPS Technologies Corp. (CPSH) showcased a series of intriguing developments that both industry watchers and investors are keeping an eye on. This small-scale player in the tech world, known for its niche in advanced materials solutions, has recently secured a $12M contract. This success is not solely interesting for its size but for the fact that it represents a 50% growth over its previous year’s order, indicating a potential upward momentum in its operational performance.

Diving deeper into the recent earnings report, CPS Technologies Corp. pulled in $4.2M for Q3 2024, a testament to its ability to maintain steady revenue streams. Despite a promising revenue, the company is not without its financial hurdles. According to key ratios, CPSH is facing several profitability challenges, including a negative EBIT margin of -5.1% and a gross margin of a modest 12.8%. With an operating income deeply into the red at around -$1.31M and a net income from continuing operations at approximately -$954,304, the figures point towards an ongoing struggle to manage costs effectively.

More Breaking News

The company’s balance sheet, however, presents a slightly brighter picture. With substantial total assets standing over $20M, and a total liabilities sum only around $3.65M, it seems that CPSH has been keen on keeping its debts in check, sporting a manageable current ratio of 4.5 — a reassuringly liquid footing. Yet, with a return on equity (ROE) of nearly 10%, there is a palpable undercurrent of potential; the company demonstrates some capacity to generate returns on the equity invested by shareholders, a silver lining for those believing in its long-term prospects.

Is the Recent Buzz Justified or Overblown?

While CPS Technologies Corp. has managed to capture the imagination of its investors with these recent contracts and the anticipation surrounding its upcoming earnings call, one cannot ignore the series of headwinds it faces. Is the market sentiment upbeat, or should cautious optimism prevail?

These questions resonate deeply within the investing community. The intrigue continues: Why has the company’s share price remained relatively volatile, showing swings over short periods? As of October 31, 2024, the opening price was $1.67, and it closed at the same mark despite intra-day fluctuations, proving that market sentiments are running both hot and cold on this small-cap stock.

Interestingly, the stock has shown resilience — a key takeaway from scrutinizing its recent activities. Its involvement in an evolving tech sector with projects spanning high-speed rail, renewable energy, and electric vehicles, aligns it well with global megatrends. However, the fundamental metrics imply the presence of underlying weaknesses, which must be vigilantly addressed to maintain investor confidence.

Strategic Moves and Speculations

Among industry circles, the $12M contract signals strategic foresight, cementing CPS Technologies Corp.’s foothold in the high-performance materials sphere. Moving forward, key factors to watch will be management’s execution in timely deliveries, cost management, and the company’s ability to capture more lucrative deals.

The impending earnings call is poised as a critical event. Investors are waiting with bated breath to gather insights from the leadership’s projections, challenges faced, and strategies to further capture market opportunities. CEO Brian Mackey’s address will crucially set the tone for what lies ahead and potentially allay any apprehensions.

Wrapping Up the Financial Pulse

To wrap up, CPS Technologies Corp.’s story is one of pockets of success underscored by financial vulnerabilities. The specter of a solid upcoming contract injects hope, but the financial fundamentals call for a watchful eye. The dynamics at play — a blend of optimism around its semiconductor supply role and caution from examination of financial basics — shape a fascinating tale of a company perched between opportunity and challenge.

Investors and market participants alike must parse through these developments to determine if CPSH can transcend current hurdles to unlock true value, or if it merely underscores the inherent risks of small-cap investments.

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Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”