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Water-Logged And Getting Wetter Stock Of The Day: SVB Financial Group (SIVB)

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 SVB Financial Group ( SIVB) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified SVB Financial Group as such a stock due to the following factors:

  • SIVB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $41.5 million.
  • SIVB has traded 105,475 shares today.
  • SIVB traded in a range 236.4% of the normal price range with a price range of $7.50.
  • SIVB traded below its daily resistance level (quality: 3 days, meaning that the stock is crossing a resistance level set by the last 3 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on SIVB:

SVB Financial Group, a diversified financial services company, provides various banking and financial products and services. It operates in three segments: Global Commercial Bank, SVB Private Bank, and SVB Capital. SIVB has a PE ratio of 23.5. Currently there are 5 analysts that rate SVB Financial Group a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for SVB Financial Group has been 238,800 shares per day over the past 30 days. SVB Financial Group has a market cap of $5.0 billion and is part of the financial sector and banking industry. The stock has a beta of 2.16 and a short float of 1.8% with 2.18 days to cover. Shares are up 8.7% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SVB Financial Group as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, expanding profit margins, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:

  • SIVB's very impressive revenue growth greatly exceeded the industry average of 0.8%. Since the same quarter one year prior, revenues leaped by 91.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 59.9% when compared to the same quarter one year prior, rising from $42.29 million to $67.62 million.
  • The gross profit margin for SVB FINANCIAL GROUP is currently very high, coming in at 95.76%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, SIVB's net profit margin of 15.26% significantly trails the industry average.
  • 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 on the basis of return on equity, SVB FINANCIAL GROUP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Powered by its strong earnings growth of 55.31% and other important driving factors, this stock has surged by 80.25% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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