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Trade-Ideas: HomeAway (AWAY) 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 HomeAway ( AWAY) 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 HomeAway as such a stock due to the following factors:

  • AWAY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $74.3 million.
  • AWAY has traded 492,234 shares today.
  • AWAY is trading at 2.63 times the normal volume for the stock at this time of day.
  • AWAY 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 AWAY with the Ticky from Trade-Ideas. See the FREE profile for AWAY NOW at Trade-Ideas

More details on AWAY:

HomeAway, Inc., together with its subsidiaries, operates an online vacation rental property marketplace that enables property owners and managers to market properties for rental to vacation travelers. AWAY has a PE ratio of 218.1. Currently there are 8 analysts that rate HomeAway a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for HomeAway has been 1.5 million shares per day over the past 30 days. HomeAway has a market cap of $3.6 billion and is part of the technology sector and internet industry. The stock has a beta of 0.68 and a short float of 13.5% with 3.36 days to cover. Shares are down 10.3% year-to-date as of the close of trading on Thursday.

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 HomeAway 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 unimpressive growth in net income and disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 8.8%. Since the same quarter one year prior, revenues rose by 26.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • AWAY 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. To add to this, AWAY has a quick ratio of 1.96, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • 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 Internet & Catalog Retail industry. The net income has significantly decreased by 134.2% when compared to the same quarter one year ago, falling from $4.55 million to -$1.56 million.
  • 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 & Catalog Retail industry and the overall market, HOMEAWAY INC's return on equity significantly trails that of both the industry average and the S&P 500.

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