Ecosphere Technologies, Inc. (OTCBB:ESPH) Sports Dramatic Drop and Return

The reason to watch Ecosphere Technologies, Inc. (OTCBB:ESPH) is the stunning crash and rebounce from the past two weeks. The ticker lost more than 50% in two days, and recovered them in three days, standing at 31 cents after gaining 19% on Friday. It is curious to see what stays behind those unusual movements, as we have not intercepted an email promotional campaign.

ESPH trades on the OTC BB markets, suggesting a more solid business, yet over three years the stock slid down from heights of $1.20. All of 2013, the ticker moved between 30 and 50 cents, except from the dramatic fall around May 20th, which coincided with the 10Q report release.

The new report shows a decrease in revenues by $7.5 million compared to the same quarter of 2012, and this bad news may have created the oversized response. Otherwise, the company shows relatively stable financials, with a potential longer-horizon outlook:

• $433,694 cash

• $5.2 million total current assets

• $5.8 million total current liabilities

• $861,619 quarterly revenues, down from $8.3 million in the same quarter of 2012

The company seems to have hit a lucrative deal in the spring of 2012, but could not repeat the success this year, leading to disappointment and two consecutive days of selling. Since then, the company attracted attention again with further press releases on the financial results and brought back investors who wisely bought the dip.

Whether such events will repeat for ESPH is questionable. The company deals in water treatments for various industries and its success depends on the adoption of its technologies. As we see, the revenues are still unstable.

On the positive side, ESPH is on the sidelines of the fracking and energy fashion trend among penny stock companies. It is a more solid ticker than other small companies promising to deal with renewable energy sources or forms of recycling. Polar Petroleum, Corp. (OTCBB:POLR) is in another class, almost inactive before being picked up by promoters. For this ticker, it is easier to predict a correction after the promoters go silent.

While ESPH seems like a longer-term bet, keep in mind the company has been in a long slide over the past months, and at 30 cents has a long way to go until it hits penny stock bottom. So stay away unless you can afford the losses. Hypothetically, ESPH could attract the attention of pumpers as a fresh and promising choice with relatively low volumes, and that would cause even more disproportionate movements.