SOS limited (SOS) is a China-based emerging blockchain and big-data-driven marketing solutions company. Staying at the forefront of digital technology innovation, the company has registered 99 software copyrights and three patents.

However, the company's shares have slumped 82.5% over the past nine months and 32% over the past month to close yesterday's trading session at $0.87. The stock is hovering near its 52-week low of $0.8120, which it hit on December 30, 2021.

Recently, investors have rebuked the company for a huge stock offering at a discount of 18%. Furthermore, China's regulatory crackdowns on big tech firms and outright prohibitions dampened investor sentiment about Chinese-based crypto miners like SOS.

Here's what could shape SOS' performance in the near term:

Additional Financing

In November, SOS entered into a securities purchase agreement with certain accredited investors to purchase approximately $90.1 million in American Depositary Shares (ADS) in a registered direct offering. The company has agreed to sell 51,500,000 ADSs for $1.75 per ADS under the terms of the securities purchase agreement. The proceeds from the offering will be used to expand the company's operations in North America and for working capital and other corporate purposes.

Poor Profitability

SOS' trailing-12-month gross profit margin of 13.41% is 54.2% lower than the industry average of 29.3%. Also, its ROC, net income margin and ROA are negative 1.65%, 3.22%, and 1.29%, respectively. Furthermore, its trailing-12-month cash from operations stood at a negative $383.18 million compared to the industry average of $208.50 million.

POWR Ratings Reflect Uncertainty

SOS has an overall F rating, equating to Strong Sell in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. SOS has an F grade for Quality and a D for Momentum. The company's negative profit margins are in sync with the Quality grade. In addition, the stock is currently trading below its 50-day and 200-day moving averages of $1.47 and $2.88, respectively, indicating a downtrend. This is consistent with the Momentum grade.

Of the 122 stocks in the D-rated Financial Services (Enterprise) industry, SOS is ranked #120.

Beyond what I've stated above, you can view SOS ratings for Growth, Value, Stability, and Sentiment here.

Bottom Line

SOS' large private placement to investors drove the stock's share price down 30% in November. In addition, many investors are concerned about the Chinese crackdown on cryptocurrency mining and the expenses associated with relocating the company's mining operations out of the country. Thus, we think SOS is best avoided now.

How Does SOS Limited (SOS) Stack Up Against its Peers?

While SOS has an overall F rating, one might want to consider its industry peers, Forrester Research Inc. (FORR), Donnelley Financial Solutions Inc. (DFIN), and Consumer Portfolio Services Inc. (CPSS), having an overall A (Strong Buy) rating.

SOS shares were trading at $0.89 per share on Tuesday afternoon, up $0.02 (+2.29%). Year-to-date, SOS has gained 8.25%, versus a 0.62% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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