Trade-Ideas LLC identified

Splunk

(

SPLK

) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Splunk as such a stock due to the following factors:

  • SPLK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $115.3 million.
  • SPLK has traded 3.6 million shares today.
  • SPLK traded in a range 250.6% of the normal price range with a price range of $4.42.
  • SPLK traded above its daily resistance level (quality: 142 days, meaning that the stock is crossing a resistance level set by the last 142 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on SPLK:

Splunk Inc. provides software solutions that enable organizations to gain real-time operational intelligence in the United States and internationally. The company's products enable users to collect, index, search, explore, monitor, and analyze data regardless of format or source. Currently there are 20 analysts that rate Splunk a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Splunk has been 1.6 million shares per day over the past 30 days. Splunk has a market cap of $7.2 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 2.04 and a short float of 10.1% with 6.58 days to cover. Shares are down 6.6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Splunk as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself 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 39.1% when compared to the same quarter one year ago, falling from -$57.03 million to -$79.32 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Software industry and the overall market, SPLUNK INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.66%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 29.78% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • SPLUNK INC's earnings per share declined by 29.8% 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, SPLUNK INC reported poor results of -$2.19 versus -$1.81 in the prior year. This year, the market expects an improvement in earnings ($0.29 versus -$2.19).
  • The gross profit margin for SPLUNK INC is currently very high, coming in at 86.55%. Regardless of SPLK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SPLK's net profit margin of -36.05% significantly underperformed when compared to the industry average.

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