Trade-Ideas LLC identified

Wayfair

(

W

) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Wayfair as such a stock due to the following factors:

  • W has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $61.4 million.
  • W has traded 132,548 shares today.
  • W is down 6.1% today.
  • W was up 10.6% yesterday.

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More details on W:

Wayfair Inc. engages in the e-commerce business in the United States. It offers approximately seven million home products under various brands. Currently there are 6 analysts that rate Wayfair a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Wayfair has been 1.1 million shares per day over the past 30 days. Wayfair has a market cap of $3.4 billion and is part of the services sector and retail industry. Shares are down 6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Wayfair as a

sell

. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

  • The gross profit margin for WAYFAIR INC is currently lower than what is desirable, coming in at 25.32%. Regardless of W's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.60% trails the industry average.
  • Compared to other companies in the Internet & Catalog Retail industry and the overall market, WAYFAIR INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • W 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.07, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has improved to $51.50 million from having none in the same quarter last year. Since the company had no net operating cash flow for the prior period, we cannot calculate a percent change in order to compare its growth rate with that of its industry average.
  • This stock has increased by 72.03% over the past year, outperforming the rise in the S&P 500 Index during the same period. Despite the fact that the stock's value has already enjoyed nice gains in the past year, we feel that the risks surrounding an investment in this stock outweigh any potential future returns.

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