Weak On High Volume: WageWorks (WAGE) - TheStreet

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

WageWorks

(

WAGE

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

  • WAGE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $13.6 million.
  • WAGE has traded 57,524 shares today.
  • WAGE is trading at 5.58 times the normal volume for the stock at this time of day.
  • WAGE is trading at a new low 3.05% 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 WAGE:

WageWorks, Inc. provides consumer-directed benefits programs (CDBs) to employees to save money on taxes in the United States. WAGE has a PE ratio of 104.3. Currently there are 4 analysts that rate WageWorks a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for WageWorks has been 344,700 shares per day over the past 30 days. WageWorks has a market cap of $2.1 billion and is part of the services sector and diversified services industry. The stock has a beta of 0.19 and a short float of 7.6% with 11.64 days to cover. Shares are up 0.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates WageWorks 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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, disappointing return on equity and premium valuation.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 5.4%. Since the same quarter one year prior, revenues rose by 26.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • WAGE's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.05, which illustrates the ability to avoid short-term cash problems.
  • WAGEWORKS INC's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WAGEWORKS INC increased its bottom line by earning $0.62 versus $0.36 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus $0.62).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Professional Services industry and the overall market, WAGEWORKS INC's return on equity is below that of both the industry average and the S&P 500.

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