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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.

Trade-Ideas LLC identified

Adtran

(

ADTN

) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Adtran as such a stock due to the following factors:

  • ADTN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $15.6 million.
  • ADTN has traded 290,492 shares today.
  • ADTN is trading at 9.96 times the normal volume for the stock at this time of day.
  • ADTN is trading at a new low 5.12% 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 ADTN:

TheStreet Recommends

ADTRAN, Inc. manufactures and sells networking and communications equipment worldwide. It operates in two divisions, Carrier Networks and Enterprise Networks. The stock currently has a dividend yield of 1.9%. ADTN has a PE ratio of 23.2. Currently there is 1 analyst that rates Adtran a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Adtran has been 672,900 shares per day over the past 30 days. Adtran has a market cap of $988.0 million and is part of the technology sector and telecommunications industry. The stock has a beta of 0.62 and a short float of 5.3% with 2.08 days to cover. Shares are down 23.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Adtran as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and deteriorating net income.

Highlights from the ratings report include:

  • ADTN's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, ADTN has a quick ratio of 2.03, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 90.57% to $14.82 million when compared to the same quarter last year. In addition, ADTRAN INC has also vastly surpassed the industry average cash flow growth rate of -19.43%.
  • ADTRAN INC's earnings per share declined by 15.0% 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, ADTRAN INC increased its bottom line by earning $0.81 versus $0.78 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.81).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, ADTN has underperformed the S&P 500 Index, declining 15.81% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Communications Equipment industry average. The net income has decreased by 21.5% when compared to the same quarter one year ago, dropping from $11.84 million to $9.29 million.

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