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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

Yelp

(

YELP

) 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 Yelp as such a stock due to the following factors:

  • YELP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $75.6 million.
  • YELP has traded 1.7 million shares today.
  • YELP traded in a range 346.5% of the normal price range with a price range of $4.37.
  • YELP traded below its daily resistance level (quality: 56 days, meaning that the stock is crossing a resistance level set by the last 56 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 YELP:

TheStreet Recommends

Yelp Inc. operates a platform that connects people with local businesses in the United States. YELP has a PE ratio of 86. Currently there are 14 analysts that rate Yelp a buy, 2 analysts rate it a sell, and 12 rate it a hold.

The average volume for Yelp has been 4.2 million shares per day over the past 30 days. Yelp has a market cap of $2.8 billion and is part of the technology sector and internet industry. The stock has a beta of 2.02 and a short float of 17.7% with 3.99 days to cover. Shares are down 22.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Yelp as a

hold

. 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 compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:

  • YELP's very impressive revenue growth greatly exceeded the industry average of 5.9%. Since the same quarter one year prior, revenues leaped by 55.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • YELP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.81, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for YELP INC is currently very high, coming in at 92.58%. Regardless of YELP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YELP's net profit margin of -1.08% significantly underperformed when compared to the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Internet Software & Services industry and the overall market, YELP INC's return on equity is below that of both the industry average and the S&P 500.
  • YELP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 42.47%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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