GameStop (GME) Stock: Weak On High Volume Today - TheStreet

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

GameStop

(

GME

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

  • GME has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $112.8 million.
  • GME has traded 3.4 million shares today.
  • GME is trading at 31.23 times the normal volume for the stock at this time of day.
  • GME is trading at a new low 14.02% 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 GME:

GameStop Corp. operates as a multichannel video game, consumer electronics, and wireless services retailer. The stock currently has a dividend yield of 3%. GME has a PE ratio of 13.5. Currently there are 11 analysts that rate GameStop a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for GameStop has been 2.3 million shares per day over the past 30 days. GameStop has a market cap of $4.9 billion and is part of the services sector and retail industry. The stock has a beta of 0.92 and a short float of 37.5% with 12.39 days to cover. Shares are down 10.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates GameStop as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 1.1%. Since the same quarter one year prior, revenues rose by 25.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • GAMESTOP CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, GAMESTOP CORP turned its bottom line around by earning $3.02 versus -$2.23 in the prior year. This year, the market expects an improvement in earnings ($3.68 versus $3.02).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 134.3% when compared to the same quarter one year prior, rising from $10.50 million to $24.60 million.
  • GME's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.20 is very weak and demonstrates a lack of ability to pay short-term obligations.

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