Trade-Ideas: Mellanox Technologies (MLNX) Is Today's

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

  • MLNX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $42.2 million.
  • MLNX has traded 197,677 shares today.
  • MLNX is down 3% today.
  • MLNX was up 5% yesterday.

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More details on MLNX:

Mellanox Technologies, Ltd., a fabless semiconductor company, produces and supplies semiconductor interconnect products for computing, storage, and communications applications in the high-performance computing, Web 2.0, storage, financial services, database, cloud, and embedded markets. MLNX has a PE ratio of 27.8. Currently there are 3 analysts that rate Mellanox Technologies a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Mellanox Technologies has been 715,900 shares per day over the past 30 days. Mellanox has a market cap of $1.5 billion and is part of the technology sector and electronics industry. The stock has a beta of 0.57 and a short float of 13.5% with 4.51 days to cover. Shares are down 41.1% year to date as of the close of trading on Thursday.

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 Mellanox Technologies as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and disappointing return on equity.

Highlights from the ratings report include:
  • MLNX's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 5.75, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for MELLANOX TECHNOLOGIES LTD is currently very high, coming in at 75.21%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.77% is in-line with the industry average.
  • MLNX, with its decline in revenue, underperformed when compared the industry average of 13.8%. Since the same quarter one year prior, revenues fell by 26.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has significantly decreased to $11.46 million or 80.62% 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 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 Semiconductors & Semiconductor Equipment industry and the overall market, MELLANOX TECHNOLOGIES LTD's return on equity is below that of both the industry average and the S&P 500.

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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