Trade-Ideas LLC identified

NeoPhotonics

(

NPTN

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

  • NPTN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $5.9 million.
  • NPTN has traded 89,339 shares today.
  • NPTN is trading at 2.16 times the normal volume for the stock at this time of day.
  • NPTN is trading at a new low 3.07% 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 NPTN:

NeoPhotonics Corporation develops, manufactures, and sells hybrid photonic integrated optoelectronic products that transmit, receive, and switch high speed digital optical signals for communications networks. NPTN has a PE ratio of 69. Currently there are 5 analysts that rate NeoPhotonics a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for NeoPhotonics has been 834,700 shares per day over the past 30 days. NeoPhotonics has a market cap of $396.9 million and is part of the technology sector and electronics industry. The stock has a beta of 1.26 and a short float of 6.8% with 2.88 days to cover. Shares are down 12.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates NeoPhotonics as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. 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 came in higher than the industry average of 3.3%. Since the same quarter one year prior, revenues rose by 21.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • NPTN's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NPTN has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 36.40% is the gross profit margin for NEOPHOTONICS CORP which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, NPTN's net profit margin of 2.32% significantly trails the industry average.
  • This stock has managed to rise its share value by 19.35% over the past twelve months. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, NEOPHOTONICS CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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