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Rovi (ROVI) Marked As A Barbarian At The Gate

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 Rovi (ROVI) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Rovi as such a stock due to the following factors:

  • ROVI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $29.5 million.
  • ROVI has traded 118,492 shares today.
  • ROVI traded in a range 204.5% of the normal price range with a price range of $1.46.
  • ROVI traded above its daily resistance level (quality: 211 days, meaning that the stock is crossing a resistance level set by the last 211 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on ROVI:

Rovi Corporation provides integrated solutions that enable the discovery, delivery, display, and monetization of digital entertainment. ROVI has a PE ratio of 125.7. Currently there are 3 analysts that rate Rovi a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Rovi has been 1.1 million shares per day over the past 30 days. Rovi has a market cap of $2.3 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.55 and a short float of 3.8% with 3.09 days to cover. Shares are up 13.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rovi as a sell. Among the areas we feel are negative, one of the most important has been weak operating cash flow.

Highlights from the ratings report include:

  • Net operating cash flow has decreased to $28.83 million or 39.61% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • 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 Software industry and the overall market, ROVI CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • ROVI, with its decline in revenue, underperformed when compared the industry average of 10.9%. Since the same quarter one year prior, revenues fell by 12.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • ROVI's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 5.86 is very high and demonstrates very strong liquidity.
  • The net income growth from the same quarter one year ago has exceeded that of the Software industry average, but is less than that of the S&P 500. The net income increased by 13.9% when compared to the same quarter one year prior, going from -$13.33 million to -$11.47 million.

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