ReTo Eco-Solutions (NASDAQ: RETO) is a Chinese construction materials company that has the market divided on it direction. In this tug-of-war between bears and bulls, it remains uncertain if its financial unsustainability is serious enough to overlook some promising news for the future.
RETO’s Subsidiary Wins Big
On the 9th of August, the market was awash with some highly positive news pertaining to ReTo Eco Solutions. The company’s subsidiary, REIT Eco, won a lucrative bid worth almost $200 million in the Yangjia River band. The project entails the development of ecological-oriented development works within Longxi County. As the parent company of the winning bidder, RETO took off in the market, surging from $0.62 to $0.85, in a matter of days. This 37% jump reflected the market’s confidence in the deal, and many seeking exposure to this stellar opportunity. This can be reflected in the daily volume jump from 44,000 to 38 million.
Critical Financial Concerns for RETO
The following weeks saw RETO undertake a slow descent without stopping. At present, the stock is at a new low of $0.66. This clearly points to bearish sentiment overcoming initial hype, which may be due to a number of red flags associated with ReTo Eco. Its revenue has been continuously falling in the last few years, and the same for its EPS. Annual EPS in 2021 was down at -$0.75, against the prior year’s figure of -$0.17. Due to this, the bid, in light of the broader context seems insignificant in terms of the broader financial unsustainability the company is faced with.
The market appears uncertain in regard to the future prospects of RETO. It has been faced with some highly promising news in the prior weeks, yet there is some serious uncertainty, given the financial red flags the company holds. Investors seek further clarity to take on a solid stance on the stock.