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TheStreet Open House
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Today's Dead Cat Bounce Stock: Perfect World (PWRD)

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

  • PWRD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $15.2 million.
  • PWRD has traded 168,894 shares today.
  • PWRD is up 4.7% today.
  • PWRD was down 12.1% yesterday.

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More details on PWRD:

Perfect World Co., Ltd., through its subsidiaries, operates as an online game developer and operator in the People's Republic of China, North America, and internationally. The company develops online games based on its proprietary game engines and development platforms. The stock currently has a dividend yield of 2%. PWRD has a PE ratio of 16.4. Currently there are 4 analysts that rate Perfect World a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Perfect World has been 328,900 shares per day over the past 30 days. Perfect World has a market cap of $1.1 billion and is part of the technology sector and computer software & services industry. Shares are up 13.5% year-to-date as of the close of trading on Tuesday.

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 Perfect World as a buy. 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, increase in stock price during the past year, attractive valuation levels and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 11.7%. Since the same quarter one year prior, revenues rose by 31.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • PWRD's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, PWRD has a quick ratio of 1.59, 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, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 98.1% when compared to the same quarter one year prior, rising from $13.16 million to $26.07 million.

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