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Trade-Ideas: Perfect World (PWRD) Is Today's "Dead Cat Bounce" 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 Perfect World (PWRD) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Perfect World as such a stock due to the following factors:

  • PWRD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $23.0 million.
  • PWRD has traded 12,979 shares today.
  • PWRD is up 4.7% today.
  • PWRD was down 7.9% yesterday.

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More details on PWRD:

Perfect World Co., Ltd., through its subsidiaries, operates as an online game developer and operator in the People's Republic of China, North America, and internationally. The company develops online games based on its proprietary game engines and development platforms. The stock currently has a dividend yield of 2.1%. PWRD has a PE ratio of 11.5. Currently there are 4 analysts that rate Perfect World a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Perfect World has been 823,100 shares per day over the past 30 days. Perfect World has a market cap of $999.2 million and is part of the technology sector and computer software & services industry. Shares are up 93.1% year to date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Perfect World as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:

  • Compared to its closing price of one year ago, PWRD's share price has jumped by 81.51%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PWRD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • PWRD's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, PWRD has a quick ratio of 1.92, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for PERFECT WORLD CO LTD is currently very high, coming in at 76.53%. Regardless of PWRD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 20.97% trails the industry average.
  • PWRD, with its decline in revenue, underperformed when compared the industry average of 8.8%. Since the same quarter one year prior, revenues fell by 11.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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