Trade-Ideas LLC identified

Proofpoint

(

PFPT

) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Proofpoint as such a stock due to the following factors:

  • PFPT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $35.3 million.
  • PFPT has traded 1.3 million shares today.
  • PFPT traded in a range 203% of the normal price range with a price range of $6.33.
  • PFPT traded below its daily resistance level (quality: 358 days, meaning that the stock is crossing a resistance level set by the last 358 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on PFPT:

TST Recommends

Proofpoint, Inc. provides threat protection, incident response, regulatory compliance, archiving, governance, eDiscovery, and secure communication solutions worldwide. Currently there are 14 analysts that rate Proofpoint a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Proofpoint has been 608,200 shares per day over the past 30 days. Proofpoint has a market cap of $2.2 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.06 and a short float of 18.5% with 9.44 days to cover. Shares are down 17.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Proofpoint as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 63.9% when compared to the same quarter one year ago, falling from -$17.35 million to -$28.43 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, PROOFPOINT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 4.47 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, PFPT has managed to keep a strong quick ratio of 2.23, which demonstrates the ability to cover short-term cash needs.
  • PROOFPOINT INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PROOFPOINT INC reported poor results of -$1.71 versus -$0.78 in the prior year. This year, the market expects an improvement in earnings (-$0.35 versus -$1.71).
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

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