Demandware (DWRE) Is Today's Dead Cat Bounce Stock

Trade-Ideas LLC identified Demandware (DWRE) as a "dead cat bounce" (down big yesterday but up big today) candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

Demandware

(

DWRE

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

  • DWRE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $39.3 million.
  • DWRE has traded 131,611 shares today.
  • DWRE is up 3% today.
  • DWRE was down 17.9% yesterday.

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More details on DWRE:

Demandware, Inc. provides enterprise-class cloud based digital commerce solutions in the United States, Germany, the United Kingdom, and internationally. Currently there are 8 analysts that rate Demandware a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Demandware has been 437,800 shares per day over the past 30 days. Demandware has a market cap of $2.1 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.88 and a short float of 15.6% with 5.43 days to cover. Shares are down 19.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Demandware 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 13.7%. Since the same quarter one year prior, revenues rose by 46.6%. 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.
  • DWRE 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. Along with this, the company maintains a quick ratio of 3.91, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for DEMANDWARE INC is currently very high, coming in at 75.39%. Regardless of DWRE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DWRE's net profit margin of -37.17% significantly underperformed when compared to the industry average.
  • 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 134.9% when compared to the same quarter one year ago, falling from -$8.52 million to -$20.02 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 Software & Services industry and the overall market, DEMANDWARE INC's return on equity significantly trails that of both the industry average and the S&P 500.

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