Trade-Ideas: Semtech (SMTC) Is Today's Weak On High Relative Volume 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
(
) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Semtech as such a stock due to the following factors:
- SMTC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $11.7 million.
- SMTC has traded 277,151 shares today.
- SMTC is trading at 41.57 times the normal volume for the stock at this time of day.
- SMTC is trading at a new low 8.02% below yesterday's close.
'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.
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More details on SMTC:
Semtech Corporation and its subsidiaries design, develop, manufacture, and market analog and mixed signal semiconductor products. Currently there are 3 analysts that rate Semtech a buy, no analysts rate it a sell, and 2 rate it a hold.
The average volume for Semtech has been 341,100 shares per day over the past 30 days. Semtech has a market cap of $2.0 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.28 and a short float of 2.7% with 3.63 days to cover. Shares are up 6.2% year-to-date as of the close of trading on Wednesday.
Analysis:
rates Semtech as a
. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.
Highlights from the ratings report include:
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Semiconductors & Semiconductor Equipment industry average. The net income increased by 41.5% when compared to the same quarter one year prior, rising from $12.45 million to $17.62 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.7%. Since the same quarter one year prior, revenues slightly increased by 5.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for SEMTECH CORP is rather high; currently it is at 55.68%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, SMTC's net profit margin of 11.83% significantly trails the industry average.
- SEMTECH CORP has improved earnings per share by 44.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SEMTECH CORP swung to a loss, reporting -$2.44 versus $0.62 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus -$2.44).
- 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 Semiconductors & Semiconductor Equipment industry and the overall market, SEMTECH CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Semtech Ratings Report.
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