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Today's Dead Cat Bounce Stock: E-Commerce China Dangdang (DANG)

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 E-Commerce China Dangdang ( DANG) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified E-Commerce China Dangdang as such a stock due to the following factors:

  • DANG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.4 million.
  • DANG has traded 943,916 shares today.
  • DANG is up 4.5% today.
  • DANG was down 5.5% yesterday.

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More details on DANG:

E-Commerce China Dangdang Inc. operates as a business-to-consumer e-commerce company in the People's Republic of China. It primarily sells books, audio-visual products, periodicals, consumer electronics, and electronic publications through its Website dangdang.com. Currently there are 2 analysts that rate E-Commerce China Dangdang a buy, 2 analysts rate it a sell, and 4 rate it a hold.

The average volume for E-Commerce China Dangdang has been 3.8 million shares per day over the past 30 days. E-Commerce China Dangdang has a market cap of $961.1 million and is part of the services sector and retail industry. Shares are up 18% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates E-Commerce China Dangdang as a sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

  • The gross profit margin for E-COMMERCE CH DANGDANG -ADR is rather low; currently it is at 18.98%. Regardless of DANG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.11% trails the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, E-COMMERCE CH DANGDANG -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
  • DANG 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. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.44 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • This stock has increased by 55.41% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in DANG do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • E-COMMERCE CH DANGDANG -ADR 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, E-COMMERCE CH DANGDANG -ADR continued to lose money by earning -$0.30 versus -$0.89 in the prior year. This year, the market expects an improvement in earnings ($0.14 versus -$0.30).

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