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21Vianet Group (VNET) Is Today's Perilous Reversal 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 21Vianet Group ( VNET) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified 21Vianet Group as such a stock due to the following factors:

  • VNET has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $16.0 million.
  • VNET has traded 94,278 shares today.
  • VNET is down 3.4% today.
  • VNET was up 6.4% yesterday.

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More details on VNET:

21Vianet Group, Inc. provides carrier-neutral Internet data center services to Internet companies, government entities, blue-chip enterprises, and small- to mid-sized enterprises in the People's Republic of China. Currently there are 3 analysts that rate 21Vianet Group a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for 21Vianet Group has been 684,400 shares per day over the past 30 days. 21Vianet Group has a market cap of $1.8 billion and is part of the technology sector and computer software & services industry. Shares are up 23.1% year-to-date as of the close of trading on Monday.

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 21Vianet Group 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 also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 11.5%. Since the same quarter one year prior, revenues rose by 34.4%. 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.
  • Compared to its closing price of one year ago, VNET's share price has jumped by 119.12%, exceeding the performance of the broader market during that same time frame. Although VNET had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • 37.75% is the gross profit margin for 21VIANET GROUP INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -25.90% is in-line with the industry average.
  • 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 Internet Software & Services industry and the overall market, 21VIANET GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 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 Software & Services industry. The net income has significantly decreased by 1375.6% when compared to the same quarter one year ago, falling from $1.91 million to -$24.42 million.

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