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

Mela

(

MELA

) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Mela as such a stock due to the following factors:

  • MELA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $4.4 million.
  • MELA has traded 530,336 shares today.
  • MELA is trading at 30.81 times the normal volume for the stock at this time of day.
  • MELA is trading at a new low 9.04% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on MELA:

MELA Sciences, Inc., a medical device company, designs, develops, and commercializes a non-invasive point-of-care instrument to aid in the detection of melanoma. Currently there are 2 analysts that rate Mela a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Mela has been 171,900 shares per day over the past 30 days. Mela has a market cap of $12.6 million and is part of the health care sector and health services industry. The stock has a beta of 2.22 and a short float of 9.1% with 0.36 days to cover. Shares are up 176.7% year-to-date as of the close of trading on Wednesday.

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 Mela as a

sell

. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • MELA'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 74.51%, 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. 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, MELA SCIENCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to -$3.63 million or 27.53% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.21%.
  • The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.68, which clearly demonstrates the ability to cover short-term cash needs.
  • MELA SCIENCES INC reported significant earnings per share improvement 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MELA SCIENCES INC continued to lose money by earning -$6.00 versus -$7.30 in the prior year. This year, the market expects an improvement in earnings (-$2.48 versus -$6.00).

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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