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

Gigamon

(

GIMO

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

  • GIMO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $15.6 million.
  • GIMO has traded 150,268 shares today.
  • GIMO is down 3% today.
  • GIMO was up 5.2% yesterday.

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More details on GIMO:

Gigamon Inc. designs, develops, and sells products and services that provide customers with visibility and control of network traffic for enterprises and services providers in the United States, rest of Americas, Europe, the Middle East, Africa, and the Asia Pacific. Currently there are 4 analysts that rate Gigamon a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Gigamon has been 459,200 shares per day over the past 30 days. Gigamon has a market cap of $881.3 million and is part of the technology sector and computer hardware industry. The stock has a beta of 1.08 and a short float of 4.6% with 2.18 days to cover. Shares are up 57.5% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Gigamon 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 solid stock price performance. 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 revenue growth greatly exceeded the industry average of 11.5%. Since the same quarter one year prior, revenues rose by 47.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • GIMO 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 2.72, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for GIGAMON INC is currently very high, coming in at 80.83%. Regardless of GIMO's high profit margin, it has managed to decrease from the same period last year.
  • GIGAMON INC reported significant earnings per share improvement 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, GIGAMON INC reported poor results of -$1.27 versus -$0.32 in the prior year. This year, the market expects an improvement in earnings ($0.62 versus -$1.27).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Software industry and the overall market, GIGAMON INC's return on equity significantly trails that of both the industry average and the S&P 500.

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