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Water-Logged And Getting Wetter: VeriSign (VRSN)

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 VeriSign ( VRSN) 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 VeriSign as such a stock due to the following factors:

  • VRSN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $59.2 million.
  • VRSN has traded 635,108 shares today.
  • VRSN traded in a range 258.1% of the normal price range with a price range of $2.06.
  • VRSN traded below its daily resistance level (quality: 158 days, meaning that the stock is crossing a resistance level set by the last 158 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in VRSN with the Ticky from Trade-Ideas. See the FREE profile for VRSN NOW at Trade-Ideas

More details on VRSN:

VeriSign, Inc. provides Internet infrastructure services to various networks worldwide. The company offers domain name registry services that operate the authoritative directory of .com, .net, .cc, .tv, and .name domains, as well as the back-end systems for various.gov, .jobs, and .edu domains. VRSN has a PE ratio of 16.1. Currently there are 2 analysts that rate VeriSign a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for VeriSign has been 1.8 million shares per day over the past 30 days. VeriSign has a market cap of $7.5 billion and is part of the technology sector and internet industry. The stock has a beta of 1.15 and a short float of 12.4% with 16.05 days to cover. Shares are down 6% 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 VeriSign as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, compelling growth in net income, revenue growth, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 176.5% when compared to the same quarter one year prior, rising from $105.64 million to $292.15 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 16.5%. Since the same quarter one year prior, revenues slightly increased by 6.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for VERISIGN INC is currently very high, coming in at 87.24%. Regardless of VRSN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VRSN's net profit margin of 118.93% significantly outperformed against the industry.
  • VERISIGN INC reported significant earnings per share improvement 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, VERISIGN INC increased its bottom line by earning $3.54 versus $1.91 in the prior year. For the next year, the market is expecting a contraction of 25.4% in earnings ($2.64 versus $3.54).

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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