Birks Group Blasts Off On Earnings, But Net Income May Be Misleading

Birks Group Inc (NYSE: BGI), a micro-cap jewelry designer and maker, is the crown-jewel of penny stock traders Tuesday. After releasing a positive earnings report this morning, Birks stock steadily rose throughout the session, hitting a high of $5.15 after trading as low as $0.50.

Although the company should be commended for cutting its total operating expenses for the year, there is one drawback to the report that seems to have been overlooked: Over 58 percent of the $5.438 million in net income that Birks reported for the year comes from a gain on the sale of assets.

While this shouldn't overshadow the improved performance of the company, it does call into question the validity of a one-time accounting event on the company's fiscal year 2016 earnings. If you back out the $3.229 million asset sale, and divide by the 17.9 million shares outstanding, the true net income for the year would be around $0.12 per share.

Despite this asset sale contribution, Birks shows its drastically reduced selling, general and administrative expenses, while limiting the same fall in gross profit for the year.

Shares have pulled back from the $5.15 high, now trading up 491 percent at $3.17.