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Back in January I took a look at a couple of popular small-cap stocks that had been on the move higher, Vonage Holdings (NYSE:VG) and RadioShack (NYSE:RSH). Surprisingly, one of these stocks gained over 100% since I wrote the article.

Not surprising is the fact the gains didn't last…

As you can see below, the share price collapsed after reaching a 52-week high in May.

But once again, shares are back on the rise. That makes this a great time to expose some noteworthy facts about this former electronics giant.

RadioShack (RSH)

As you know, RadioShack is a national retailer of mobile technology products and services, as well as personal and home products.

And the stock had been in a death spiral from $12 per share in late 2011, down to just $2 earlier this year. That is up until the latest bounce higher in February...

I think it's important to point out that the bounce seems to have no connection to earnings. As you can see below, the past four quarters look absolutely horrible…

· Sept. '12 - $47.1M

· Dec. '12 - $63.3M

· Mar. '13 - $43.3M

· June '13 - $53.1M

And given the negative earnings surprise of 250% and 120% in each of the previous two respective quarters, I wouldn't give much credence to the current batch of analyst estimates for the upcoming quarters (which still project losses).

So what's moving the stock higher?

Well, I'd say we're looking at nothing more than words, speculation, and a confusing upgrade at this point.

For starters, the company finally hired a new CEO, Joe Magnacca. That seemed to spark the initial pop.

More recently, Mr. Magnacca brought in a new interim CFO and investment banker in what many are speculating is a move to refinance the company's debt and gain additional liquidity.

But the problem for RadioShack is it owns little real estate for lenders to secure additional funds with. If you're not aware, RSH leases most of its retail store space- which does it little good when looking for huge loans.

However, the most perplexing catalyst supporting the resurgent stock price comes from the equity analyst firm Zacks Equity Research.

On August 28, Zacks upgraded RadioShack shares to Neutral.

So...

With a continued string of losses both realized and projected into 2014, what could the Zacks analyst possibly see? Here's what Zacks had to say…

RadioShack has adopted 5 strategies to restructure its business model. These are: 1) repositioning the brand 2) revamping product assortment 3) reinvigorating stores 4) achieving operational efficiency and 5) attaining financial flexibility. The company is taking the service of business advisory firm, AlixPartners and investment bank Peter J. Solomon Co. to make a turnaround. Management has decided to close all underperforming stores once their lease period expires.

To me that reads like a fancy corporate mission statement, not a reason for an upgrade. But it gets even more confusing the further you read…

Zacks goes on to point to a 1.3% year-over-year growth in company-owned store sales and kiosks. In my book, this isn't a compelling argument for an upgrade. 10%, maybe- but not 1.3%.

Then the upgrade points to a sixth consecutive quarter of growth in the signature line... with year-over-year growth reaching 6.4%. Somehow the analyst left out that sales in RadioShack's consumer electronics platform decreased 11.3% for the second quarter and 19% for the first six months of 2013 (compared to 2012).

Correct me if I'm wrong, but isn't RadioShack a consumer electronics focused retailer?

But here's where the analyst really loses me…

This Zacks analyst stated-

The company is striving to gain more importance as a strategic partner for nationwide wireless operators like Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T) and Sprint Corp. (NYSE:S).

Maybe this analyst has never heard of RadioShack's competition? I think it's fair to speculate the big wireless providers may just have its attention focused on mega-retailers such as Wal-Mart, Target, Amazon and Best Buy… just to name a few.

The point I'm making is that there's no guarantee RSH will be able to become a favorite retailer of the wireless big boys once again, no matter how much it "strives".

So where exactly is the justification for the upgrade? That's a great question...

In my opinion, Zack's analyst covering RSH doesn't have enough positive to say to warrant an upgrade. Agree or disagree, you can read for yourself what Zacks says right here

Finally, if you're wondering why I wouldn't have upgraded or recommend anything but a sell on RadioShack shares right now- here's a short bullet point list...

  • Projected average loss of $0.36 next quarter
  • Projected average loss of $0.63 next year
  • Debt-to-equity ratio of 1.4x
  • Long-term debt-to-equity ratio of 0.99x
  • Short Interest has grown to over 39% of the float
  • Leadership is still closing non-performing stores
  • Growth has yet to resume to notable levels across all platforms
  • And finally, the company has yet to report positive earnings

Keeping you one step ahead,

Source: Notable Small-Cap Stocks - RadioShack