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Trade-Ideas: VMware (VMW) Is Today's Pre-Market Leader Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified VMware ( VMW) as a pre-market leader candidate. In addition to specific proprietary factors, Trade-Ideas identified VMware as such a stock due to the following factors:

  • VMW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $178.9 million.
  • VMW traded 21,078 shares today in the pre-market hours as of 7:38 AM.
  • VMW is up 14% today from yesterday's close.

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More details on VMW:

VMware, Inc. provides virtualization infrastructure solutions in the United States and internationally. VMW has a PE ratio of 42.0. Currently there are 13 analysts that rate VMware a buy, 2 analysts rate it a sell, and 16 rate it a hold.

The average volume for VMware has been 2.5 million shares per day over the past 30 days. VMware has a market cap of $9.1 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.47 and a short float of 13.8% with 5.36 days to cover. Shares are down 25.7% year to date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates VMware as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • VMW's revenue growth has slightly outpaced the industry average of 9.4%. Since the same quarter one year prior, revenues rose by 12.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • VMW's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, VMW has a quick ratio of 2.02, which demonstrates the ability of the company to cover short-term liquidity needs.
  • VMWARE INC's earnings per share declined by 9.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VMWARE INC increased its bottom line by earning $1.71 versus $1.67 in the prior year. This year, the market expects an improvement in earnings ($3.29 versus $1.71).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Software industry and the overall market, VMWARE INC's return on equity is below that of both the industry average and the S&P 500.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, VMW has underperformed the S&P 500 Index, declining 20.32% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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