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 or Stephanie Link.
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 $75.4 million.
- RAX has traded 2.1 million shares today.
- RAX traded in a range 219.7% of the normal price range with a price range of $1.84.
- RAX traded below its daily resistance level (quality: 34 days, meaning that the stock is crossing a resistance level set by the last 34 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 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 61.3. Currently there are 6 analysts that rate Rackspace Hosting a buy, 3 analysts rate it a sell, and 6 rate it a hold.
The average volume for Rackspace Hosting has been 3.6 million shares per day over the past 30 days. Rackspace Hosting has a market cap of $5.2 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.42 and a short float of 9.2% with 3.38 days to cover. Shares are down 7.3% year-to-date as of the close of trading on Thursday.
rates Rackspace Hosting as a
. 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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and relatively poor performance when compared with the S&P 500 during the past year.
Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 21.3%. Since the same quarter one year prior, revenues rose by 16.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although RAX's debt-to-equity ratio of 0.06 is very low, it is currently higher than that of the industry average. To add to this, RAX has a quick ratio of 1.55, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for RACKSPACE HOSTING INC is rather high; currently it is at 66.65%. Regardless of RAX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RAX's net profit margin of 6.04% is significantly lower than the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Internet Software & Services industry. The net income has decreased by 6.7% when compared to the same quarter one year ago, dropping from $27.26 million to $25.45 million.
- 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. 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.