Zynga (ZNGA) In A Perilous Reversal

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

  • ZNGA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $138.0 million.
  • ZNGA has traded 1.8 million shares today.
  • ZNGA is down 5.5% today.
  • ZNGA was up 23.6% yesterday.

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More details on ZNGA:

Zynga Inc. develops, markets, and operates online social games as live services on the Internet, social networking sites, and mobile platforms in the United States and internationally. Currently there is 1 analyst that rates Zynga a buy, 3 analysts rate it a sell, and 15 rate it a hold.

The average volume for Zynga has been 20.7 million shares per day over the past 30 days. Zynga has a market cap of $2.3 billion and is part of the technology sector and computer software & services industry. Shares are up 8.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Zynga as a sell. Among the areas we feel are negative, one of the most important has been weak operating cash flow.

Highlights from the ratings report include:
  • Net operating cash flow has significantly decreased to -$4.86 million or 116.11% 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 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 Software industry and the overall market, ZYNGA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 11.5%. Since the same quarter one year prior, revenues fell by 36.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for ZYNGA INC is currently very high, coming in at 87.65%. 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 -0.03% is in-line with the industry average.
  • ZNGA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.77, which clearly demonstrates the ability to cover short-term cash needs.

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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