Splunk (SPLK) Showing Signs Of Being A Roof Leaker
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 Splunk (SPLK) 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 Splunk as such a stock due to the following factors:
- SPLK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $248.6 million.
- SPLK has traded 3.8 million shares today.
- SPLK is trading at 2.10 times the normal volume for the stock at this time of day.
- SPLK 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 SPLK with the Ticky from Trade-Ideas. See the FREE profile for SPLK NOW at Trade-IdeasMore details on SPLK: Splunk, Inc. provides software solutions that provide real-time operational intelligence. Currently there are 14 analysts that rate Splunk a buy, 1 analyst rates it a sell, and 6 rate it a hold.The average volume for Splunk has been 2.2 million shares per day over the past 30 days. Splunk has a market cap of $8.8 billion and is part of the technology sector and computer software & services industry. Shares are up 3.6% 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 Splunk as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and feeble growth in its earnings per share.Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 429.6% when compared to the same quarter one year ago, falling from -$6.16 million to -$32.63 million.
- SPLUNK INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SPLUNK INC reported poor results of -$0.75 versus -$0.39 in the prior year. This year, the market expects an improvement in earnings ($0.00 versus -$0.75).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market, SPLUNK INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for SPLUNK INC is currently very high, coming in at 90.99%. Regardless of SPLK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SPLK's net profit margin of -32.66% significantly underperformed when compared to the industry average.
- Net operating cash flow has increased to $34.43 million or 38.96% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.87%.
- You can view the full Splunk Ratings Report.
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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