Opentable (OPEN) Is Today's Roof Leaker Stock

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 Opentable ( OPEN) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Opentable as such a stock due to the following factors:

  • OPEN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $69.2 million.
  • OPEN has traded 222,320 shares today.
  • OPEN is trading at 1.64 times the normal volume for the stock at this time of day.
  • OPEN crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on OPEN:

OpenTable, Inc. provides restaurant reservation solutions primarily in the United States, Canada, Germany, Japan, Mexico, and the United Kingdom. It offers solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. OPEN has a PE ratio of 37.1. Currently there is 1 analyst that rates Opentable a buy, 1 analyst rates it a sell, and 11 rate it a hold.

The average volume for Opentable has been 563,500 shares per day over the past 30 days. Opentable has a market cap of $1.8 billion and is part of the technology sector and internet industry. The stock has a beta of 1.28 and a short float of 25.4% with 5.08 days to cover. Shares are down 4.7% year-to-date as of the close of trading on Monday.

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 Opentable as a buy. 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, notable return on equity, impressive record of earnings per share growth and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • OPEN's revenue growth has slightly outpaced the industry average of 16.7%. Since the same quarter one year prior, revenues rose by 21.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • OPEN 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. To add to this, OPEN has a quick ratio of 2.43, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, OPENTABLE INC's return on equity exceeds that of both the industry average and the S&P 500.
  • OPENTABLE INC has improved earnings per share by 34.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, OPENTABLE INC increased its bottom line by earning $1.40 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($2.26 versus $1.40).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 38.2% when compared to the same quarter one year prior, rising from $7.46 million to $10.31 million.

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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