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

InvenSense

(

INVN

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

  • INVN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $30.5 million.
  • INVN has traded 203,337 shares today.
  • INVN is down 3.2% today.
  • INVN was up 5.1% yesterday.

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More details on INVN:

InvenSense, Inc. designs, develops, markets, and sells micro-electro-mechanical system (MEMS) gyroscopes for motion tracking devices in consumer electronics. Currently there are 6 analysts that rate InvenSense a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for InvenSense has been 1.9 million shares per day over the past 30 days. InvenSense has a market cap of $1.2 billion and is part of the technology sector and electronics industry. Shares are down 15.3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates InvenSense 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 increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • INVN's very impressive revenue growth greatly exceeded the industry average of 2.8%. Since the same quarter one year prior, revenues leaped by 68.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 4.79, which clearly demonstrates the ability to cover short-term cash needs.
  • INVENSENSE 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, INVENSENSE INC swung to a loss, reporting -$0.02 versus $0.07 in the prior year. This year, the market expects an improvement in earnings ($0.67 versus -$0.02).
  • INVN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 42.44%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, INVENSENSE INC's return on equity significantly trails that of both the industry average and the S&P 500.

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