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Trade-Ideas: Youku Tudou Inc ADR Repr Class A (YOKU) Is Today's "Roof Leaker" Stock

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 Youku Tudou Inc ADR repr Class A (YOKU) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Youku Tudou Inc ADR repr Class A as such a stock due to the following factors:

  • YOKU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $147.0 million.
  • YOKU has traded 3.7 million shares today.
  • YOKU is trading at 1.78 times the normal volume for the stock at this time of day.
  • YOKU crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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

More details on YOKU:

Youku Tudou Inc. operates as an Internet television company in the People's Republic of China. Its Internet television platform enables consumers to search, view, and share video content across various devices. Currently there are 4 analysts that rate Youku Tudou Inc ADR repr Class A a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Youku Tudou Inc ADR repr Class A has been 4.0 million shares per day over the past 30 days. Youku Tudou Inc ADR repr Class A has a market cap of $4.6 billion and is part of the technology sector and internet industry. Shares are down 5.4% year-to-date as of the close of trading on Wednesday.

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 Youku Tudou Inc ADR repr Class A as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 47.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • YOKU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.33, which clearly demonstrates the ability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, YOUKU TUDOU INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for YOUKU TUDOU INC is currently lower than what is desirable, coming in at 27.85%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -3.31% is significantly below that of the industry average.

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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