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

  • INVN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $66.9 million.
  • INVN has traded 5.5 million shares today.
  • INVN is up 3.1% today.
  • INVN was down 5.9% yesterday.

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More details on INVN:

InvenSense, Inc. designs, develops, markets, and sells micro-electro-mechanical system (MEMS) gyroscopes for motion tracking devices in consumer electronics. INVN has a PE ratio of 28.5. Currently there are 7 analysts that rate InvenSense a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for InvenSense has been 2.8 million shares per day over the past 30 days. InvenSense has a market cap of $1.5 billion and is part of the technology sector and electronics industry. Shares are up 57.7% year to date as of the close of trading on Friday.

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 InvenSense as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 4.8%. Since the same quarter one year prior, revenues rose by 42.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, INVENSENSE INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 33.33% and other important driving factors, this stock has surged by 30.14% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Electronic Equipment, Instruments & Components industry average, but is greater than that of the S&P 500. The net income increased by 34.9% when compared to the same quarter one year prior, rising from $7.65 million to $10.32 million.

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