Today's Perilous Reversal Stock: RF Micro Devices (RFMD)

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

  • RFMD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $39.9 million.
  • RFMD has traded 216,457 shares today.
  • RFMD is down 3.9% today.
  • RFMD was up 6.1% yesterday.

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More details on RFMD:

RF Micro Devices, Inc. engages in the design, development, manufacture, and marketing of radio frequency (RF) solutions for original equipment manufacturers and original design manufacturers in wireless and wired communications applications in the United States and internationally. Currently there are 10 analysts that rate RF Micro Devices a buy, 2 analysts rate it a sell, and 1 rates it a hold.

The average volume for RF Micro Devices has been 4.9 million shares per day over the past 30 days. RF Micro Devices has a market cap of $1.3 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.03 and a short float of 6.3% with 1.91 days to cover. Shares are down 10.5% year-to-date as of the close of trading on Friday.

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 RF Micro Devices 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 compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 48.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RFMD's debt-to-equity ratio is very low at 0.13 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 1.41, which illustrates the ability to avoid short-term cash problems.
  • RF MICRO DEVICES INC reported significant earnings per share improvement 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, RF MICRO DEVICES INC reported poor results of -$0.20 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus -$0.20).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, RF MICRO DEVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • RFMD has underperformed the S&P 500 Index, declining 6.96% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

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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