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

Volcano

(

VOLC

) as an unusual social activity candidate. In addition to specific proprietary factors, Trade-Ideas identified Volcano as such a stock due to the following factors:

  • VOLC has 12x the normal benchmarked social activity for this time of the day compared to its average of 3.52 mentions/day.
  • VOLC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $170.6 million.

Identifying stocks with 'Unusual Social Activity' tends to be a valuable process for traders looking to capitalize on the 'talk of the town' stocks that are basking in far more attention from the StockTwits financial community than normal. Good press? Bad press? It ultimately doesn't matter if it's good or bad if you know how to trade around the sentiment. Certain hedge funds use such data for their proprietary algorithms and it is not uncommon to see shared social sentiment play itself out in a stock's price trend.

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More details on VOLC:

Volcano Corporation designs, develops, manufactures, and commercializes a suite of precision guided therapy tools worldwide. The company operates in two segments, Medical and Industrial. Currently there are 5 analysts that rate Volcano a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Volcano has been 865,600 shares per day over the past 30 days. Volcano has a market cap of $587.8 million and is part of the health care sector and health services industry. The stock has a beta of 0.50 and a short float of 10.6% with 0.51 days to cover. Shares are down 47.4% year-to-date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Volcano as a

sell

. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself, generally high debt management risk 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 Health Care Equipment & Supplies industry and the overall market, VOLCANO CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$3.67 million or 148.82% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, VOLC has managed to keep a strong quick ratio of 2.47, which demonstrates the ability to cover short-term cash needs.
  • Looking at the price performance of VOLC's shares over the past 12 months, there is not much good news to report: the stock is down 45.52%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
  • VOLCANO CORP's earnings per share declined by 6.7% 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, VOLCANO CORP swung to a loss, reporting -$0.63 versus $0.14 in the prior year. This year, the market expects an improvement in earnings (-$0.17 versus -$0.63).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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