Trade-Ideas LLC identified

VeriSign

(

VRSN

) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified VeriSign as such a stock due to the following factors:

  • VRSN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $73.5 million.
  • VRSN has traded 374,560 shares today.
  • VRSN is trading at 1.56 times the normal volume for the stock at this time of day.
  • VRSN crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on VRSN:

VeriSign, Inc. provides domain name registry services and Internet security worldwide. The company offers registry services that operate the authoritative directory of .com, .net, .cc, .tv, and .name domain names, as well as the back-end systems for .gov, .jobs, .edu, and other domain names. VRSN has a PE ratio of 28. Currently there are no analysts that rate VeriSign a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for VeriSign has been 727,800 shares per day over the past 30 days. VeriSign has a market cap of $9.2 billion and is part of the technology sector and internet industry. The stock has a beta of 1.14 and a short float of 30.1% with 20.50 days to cover. Shares are down 3.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates VeriSign as a

buy

. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, increase in net income, revenue growth and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 32.17% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, VRSN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • VERISIGN INC has improved earnings per share by 24.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, VERISIGN INC increased its bottom line by earning $2.82 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($3.50 versus $2.82).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Internet Software & Services industry average. The net income increased by 21.8% when compared to the same quarter one year prior, going from $88.24 million to $107.46 million.
  • VRSN's revenue growth trails the industry average of 20.7%. Since the same quarter one year prior, revenues slightly increased by 9.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for VERISIGN INC is currently very high, coming in at 87.33%. Regardless of VRSN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VRSN's net profit margin of 38.12% significantly outperformed against the industry.

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