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HDFC Bank (HDB) Highlighted As 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 HDFC Bank ( HDB) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified HDFC Bank as such a stock due to the following factors:

  • HDB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $45.8 million.
  • HDB has traded 2.6 million shares today.
  • HDB is down 6.1% today.
  • HDB was up 6.5% yesterday.

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More details on HDB:

HDFC Bank Limited, together with its subsidiaries, provides a range of financial products and services to individuals and businesses in India, as well as in Bahrain and Hong Kong. The company operates in four segments: Retail Banking, Wholesale Banking, Treasury, and Other Banking Operations. The stock currently has a dividend yield of 0.7%. HDB has a PE ratio of 24.6. Currently there are 2 analysts that rate HDFC Bank a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for HDFC Bank has been 931,000 shares per day over the past 30 days. HDFC has a market cap of $27.6 billion and is part of the financial sector and banking industry. Shares are down 15% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates HDFC Bank as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, premium valuation and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 10.2%. 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 Commercial Banks industry and the overall market, HDFC BANK LTD's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for HDFC BANK LTD is rather high; currently it is at 58.02%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, HDB's net profit margin of 15.74% significantly trails the industry average.
  • HDB has underperformed the S&P 500 Index, declining 16.31% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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