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

  • YELP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $260.9 million.
  • YELP has traded 249,238 shares today.
  • YELP is up 3.2% today.
  • YELP was down 6% yesterday.

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More details on YELP:

Yelp, Inc. operates Yelp.com, an online urban city guide that helps people find places to eat, shop, drink, relax, and play based on the informed opinions of a community of locals in the know. Currently there are 9 analysts that rate Yelp a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Yelp has been 3.1 million shares per day over the past 30 days. Yelp has a market cap of $2.8 billion and is part of the technology sector and internet industry. Shares are up 271.5% year to date as of the close of trading on Monday.

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 Yelp as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:

  • YELP's very impressive revenue growth greatly exceeded the industry average of 22.6%. Since the same quarter one year prior, revenues leaped by 68.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • YELP 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. Along with this, the company maintains a quick ratio of 4.99, which clearly demonstrates the ability to cover short-term cash needs.
  • YELP 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, YELP INC reported poor results of -$0.30 versus -$0.15 in the prior year. This year, the market expects an improvement in earnings (-$0.11 versus -$0.30).
  • Compared to other companies in the Internet Software & Services industry and the overall market, YELP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for YELP INC is currently very high, coming in at 92.70%. Regardless of YELP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YELP's net profit margin of -1.59% significantly underperformed when compared to the industry average.

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