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Trade-Ideas: Polycom (PLCM) 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 Polycom ( PLCM) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Polycom as such a stock due to the following factors:

  • PLCM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.2 million.
  • PLCM has traded 707,433 shares today.
  • PLCM is up 8.1% today.
  • PLCM was down 5.3% yesterday.

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More details on PLCM:

Polycom, Inc. provides standards-based unified communications and collaboration (UC&C) solutions for voice and video collaboration. Currently there is 1 analyst that rates Polycom a buy, 2 analysts rate it a sell, and 9 rate it a hold.

The average volume for Polycom has been 2.0 million shares per day over the past 30 days. Polycom has a market cap of $1.8 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 1.07 and a short float of 6.1% with 5.05 days to cover. Shares are down 4.9% 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 Polycom as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, growth in earnings per share and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • PLCM has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, PLCM has a quick ratio of 2.22, which demonstrates the ability of the company to cover short-term liquidity needs.
  • POLYCOM INC reported significant earnings per share improvement 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, POLYCOM INC swung to a loss, reporting -$0.20 versus $0.70 in the prior year. This year, the market expects an improvement in earnings ($0.54 versus -$0.20).
  • The revenue fell significantly faster than the industry average of 27.9%. Since the same quarter one year prior, revenues slightly dropped by 3.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has decreased to $32.25 million or 22.11% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Communications Equipment industry and the overall market, POLYCOM INC's return on equity significantly trails that of both the industry average and the S&P 500.

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