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Stocks Under $10 with 50-100% upside potential - 14 days FREE!
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Today's Dead Cat Bounce Stock: Perfect World Co. Ltd. ADR Repr Class B (PWRD)

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 Perfect World Co. Ltd. ADR repr Class B (PWRD) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Perfect World Co. Ltd. ADR repr Class B as such a stock due to the following factors:

  • PWRD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $29.5 million.
  • PWRD has traded 93,501 shares today.
  • PWRD is up 3.5% today.
  • PWRD was down 6.6% yesterday.

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More details on PWRD:

Perfect World Co., Ltd., through its subsidiaries, operates as an online game developer and operator in the People's Republic of China, North America, and internationally. The company develops online games based on its proprietary game engines and development platforms. The stock currently has a dividend yield of 1.7%. PWRD has a PE ratio of 14.3. Currently there are 3 analysts that rate Perfect World Co. Ltd. ADR repr Class B a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Perfect World Co. Ltd. ADR repr Class B has been 793,200 shares per day over the past 30 days. Perfect World Co. Ltd. ADR repr Class B has a market cap of $1.3 billion and is part of the technology sector and computer software & services industry. Shares are up 44.3% 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 Perfect World Co. Ltd. ADR repr Class B as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity 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 10.1%. Since the same quarter one year prior, revenues rose by 23.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • PWRD's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, PWRD has a quick ratio of 1.89, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for PERFECT WORLD CO LTD is currently very high, coming in at 76.68%. Regardless of PWRD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PWRD's net profit margin of 14.51% is significantly lower than the industry average.
  • PERFECT WORLD CO LTD has improved earnings per share by 39.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PERFECT WORLD CO LTD reported lower earnings of $1.79 versus $3.05 in the prior year. For the next year, the market is expecting a contraction of 14.0% in earnings ($1.54 versus $1.79).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Software industry and the overall market, PERFECT WORLD CO LTD's return on equity is below that of both the industry average and the S&P 500.

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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