Proofpoint (PFPT) Stock Will Continue to Rise

Our next point and figure price objective for Proofpoint (PFPT) shares is $83.
By Bruce Kamich ,

NEW YORK (TheStreet) -- Lots of good-looking charts still out there. Here's another one --Proofpoint (PFPT) - Get Report .

PFPT has been in an uptrend all year, see chart above. The popular 50-day and 200-day moving averages are bullishly aligned. PFPT had a shallow and short-lived correction this summer. The On-Balance-Volume (OBV) line has been going up since May, confirming the rally. The momentum study is not signaling concerns with any bearish divergences.

We can see another bullish alignment in this chart, above. Prices are rising and have moved above the up-sloping 40-week moving average. The Moving Average Convergence Divergence (MACD) oscillator has given a new buy signal. Prices are lower today, and we would consider that a buying opportunity. Risk 8% from entry. Our next point and figure price objective is $83.

TheStreet Ratings team rates PROOFPOINT INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate PROOFPOINT INC (PFPT) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk and feeble growth in its earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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 Software industry. The net income has significantly decreased by 63.9% when compared to the same quarter one year ago, falling from -$17.35 million to -$28.43 million.
  • 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 Software industry and the overall market, PROOFPOINT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 4.47 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, PFPT has managed to keep a strong quick ratio of 2.23, which demonstrates the ability to cover short-term cash needs.
  • PROOFPOINT INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PROOFPOINT INC reported poor results of -$1.71 versus -$0.78 in the prior year. This year, the market expects an improvement in earnings (-$0.35 versus -$1.71).
  • The gross profit margin for PROOFPOINT INC is currently very high, coming in at 77.14%. 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 -41.11% is in-line with the industry average.
  • You can view the full analysis from the report here: PFPT

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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