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Trade-Ideas: Changyou.com (CYOU) Is Today's "Perilous Reversal" 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 Changyou.com ( CYOU) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Changyou.com as such a stock due to the following factors:

  • CYOU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.7 million.
  • CYOU has traded 25,660 shares today.
  • CYOU is down 3.6% today.
  • CYOU was up 6.9% yesterday.

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More details on CYOU:

Changyou.com Limited develops and operates online games in the People's Republic of China. The stock currently has a dividend yield of 16%. CYOU has a PE ratio of 0.6. Currently there are 5 analysts that rate Changyou.com a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Changyou.com has been 233,300 shares per day over the past 30 days. Changyou.com has a market cap of $1.7 billion and is part of the technology sector and computer software & services industry. Shares are up 23% 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 Changyou.com as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, growth in earnings per share, attractive valuation levels and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 5.9%. Since the same quarter one year prior, revenues rose by 23.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 40.73% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CYOU should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • CHANGYOU.COM LTD has improved earnings per share by 9.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CHANGYOU.COM LTD increased its bottom line by earning $5.29 versus $4.61 in the prior year. This year, the market expects an improvement in earnings ($5.61 versus $5.29).
  • The gross profit margin for CHANGYOU.COM LTD is currently very high, coming in at 83.00%. Regardless of CYOU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CYOU's net profit margin of 41.21% significantly outperformed against the industry.

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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