AVG Technologies (AVG) Showing Signs Of A Dead Cat Bounce Today

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 AVG Technologies ( AVG) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified AVG Technologies as such a stock due to the following factors:

  • AVG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $16.7 million.
  • AVG has traded 515,787 shares today.
  • AVG is up 3.1% today.
  • AVG was down 5.3% yesterday.

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More details on AVG:

AVG Technologies N.V. engages in the development and sale of Internet security software and online service solutions under the AVG brand name. AVG has a PE ratio of 20.3. Currently there are 2 analysts that rate AVG Technologies a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for AVG Technologies has been 858,400 shares per day over the past 30 days. AVG has a market cap of $1.4 billion and is part of the technology sector and computer software & services industry. Shares are up 62.5% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates AVG Technologies as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:
  • Compared to other companies in the Software industry and the overall market, AVG TECHNOLOGIES NV's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 21.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for AVG TECHNOLOGIES NV is currently very high, coming in at 89.64%. 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 21.60% trails the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Software industry average, but is greater than that of the S&P 500. The net income increased by 96.4% when compared to the same quarter one year prior, rising from $11.05 million to $21.69 million.
  • The debt-to-equity ratio is very high at 2.41 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.42, which clearly demonstrates the inability to cover short-term cash needs.

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