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

ServiceNow

(

NOW

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

  • NOW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $68.9 million.
  • NOW has traded 193,094 shares today.
  • NOW is trading at 7.75 times the normal volume for the stock at this time of day.
  • NOW is trading at a new low 3.01% 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 NOW:

ServiceNow, Inc. provides cloud-based solutions that define, structure, manage, and automate services to enterprise operations in North America, Europe, the Middle East, Africa, the Asia Pacific, and other countries. Currently there are 18 analysts that rate ServiceNow a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for ServiceNow has been 1.2 million shares per day over the past 30 days. ServiceNow has a market cap of $11.7 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.61 and a short float of 4.7% with 7.47 days to cover. Shares are up 15.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates ServiceNow as a

sell

. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • 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, SERVICENOW INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • SERVICENOW INC's earnings per share declined by 26.7% in the most recent quarter compared to 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, SERVICENOW INC reported poor results of -$1.23 versus -$0.54 in the prior year. This year, the market expects an improvement in earnings ($0.19 versus -$1.23).
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Software industry average, but is less than that of the S&P 500. The net income has significantly decreased by 34.1% when compared to the same quarter one year ago, falling from -$43.31 million to -$58.09 million.
  • NOW's debt-to-equity ratio of 0.99 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that NOW's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.64 is high and demonstrates strong liquidity.
  • Compared to its closing price of one year ago, NOW's share price has jumped by 33.98%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in NOW do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

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