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Ubiquiti Networks (UBNT) Showing Signs Of Being Water-Logged And Getting Wetter

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 Ubiquiti Networks (UBNT) 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 Ubiquiti Networks as such a stock due to the following factors:

  • UBNT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $79.2 million.
  • UBNT has traded 796,663 shares today.
  • UBNT traded in a range 206.9% of the normal price range with a price range of $5.40.
  • UBNT traded below its daily resistance level (quality: 11 days, meaning that the stock is crossing a resistance level set by the last 11 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 UBNT:

Ubiquiti Networks, Inc., together with its subsidiaries, offers a portfolio of networking products and solutions for service providers and enterprises. UBNT has a PE ratio of 37.4. Currently there are 7 analysts that rate Ubiquiti Networks a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Ubiquiti Networks has been 1.3 million shares per day over the past 30 days. Ubiquiti has a market cap of $4.8 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 1.92 and a short float of 23.1% with 3.58 days to cover. Shares are up 19.3% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ubiquiti Networks as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:

  • UBNT's very impressive revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior, revenues leaped by 84.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 135.00% and other important driving factors, this stock has surged by 320.34% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Net operating cash flow has slightly increased to $27.62 million or 2.95% when compared to the same quarter last year. Despite an increase in cash flow, UBIQUITI NETWORKS INC's cash flow growth rate is still lower than the industry average growth rate of 20.08%.
  • Despite currently having a low debt-to-equity ratio of 0.31, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.70 is very high and demonstrates very strong liquidity.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, UBIQUITI NETWORKS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.

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