
Rackspace Hosting (RAX) Is Water-Logged And Getting Wetter Today
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
(
) 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 Rackspace Hosting as such a stock due to the following factors:
- RAX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $85.1 million.
- RAX has traded 1.0 million shares today.
- RAX traded in a range 258.8% of the normal price range with a price range of $3.01.
- RAX traded below its daily resistance level (quality: 362 days, meaning that the stock is crossing a resistance level set by the last 362 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.
EXCLUSIVE OFFER: Get the inside scoop on opportunities in RAX with the Ticky from Trade-Ideas. See the FREE profile for RAX NOW at Trade-Ideas
More details on RAX:
Rackspace Hosting, Inc., through its subsidiaries, provides cloud computing services and managing Web-based IT systems for small and medium-sized businesses and large enterprises worldwide. RAX has a PE ratio of 42. Currently there are 9 analysts that rate Rackspace Hosting a buy, 1 analyst rates it a sell, and 5 rate it a hold.
The average volume for Rackspace Hosting has been 2.3 million shares per day over the past 30 days. Rackspace Hosting has a market cap of $4.6 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.52 and a short float of 10.5% with 3.72 days to cover. Shares are down 32.2% year-to-date as of the close of trading on Monday.
EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.
Analysis:
rates Rackspace Hosting as a
. 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 growth in earnings per share. 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:
- RAX's revenue growth has slightly outpaced the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 14.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Although RAX's debt-to-equity ratio of 0.14 is very low, it is currently higher than that of the industry average. To add to this, RAX has a quick ratio of 1.72, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has slightly increased to $145.30 million or 2.57% when compared to the same quarter last year. Despite an increase in cash flow, RACKSPACE HOSTING INC's cash flow growth rate is still lower than the industry average growth rate of 18.66%.
- After a year of stock price fluctuations, the net result is that RAX's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Internet Software & Services industry and the overall market, RACKSPACE HOSTING INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Rackspace Hosting Ratings Report.
EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.








