Cray (CRAY) Showing Signs Of Perilous Reversal 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 Cray ( CRAY) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Cray as such a stock due to the following factors:

  • CRAY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $30.8 million.
  • CRAY has traded 80,486 shares today.
  • CRAY is down 4% today.
  • CRAY was up 39% yesterday.

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More details on CRAY:

Cray Inc., together with its subsidiaries, designs, develops, manufactures, markets, and services high-performance computing (HPC) systems. Currently there are 3 analysts that rate Cray a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Cray has been 373,200 shares per day over the past 30 days. Cray has a market cap of $1.2 billion and is part of the technology sector and computer hardware industry. The stock has a beta of 1.05 and a short float of 10.1% with 3.78 days to cover. Shares are up 9.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cray 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 solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • CRAY's very impressive revenue growth greatly exceeded the industry average of 4.7%. Since the same quarter one year prior, revenues leaped by 52.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • CRAY 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.34, which illustrates the ability to avoid short-term cash problems.
  • 43.88% is the gross profit margin for CRAY INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, CRAY's net profit margin of -20.27% significantly underperformed when compared to the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, CRAY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$108.49 million or 277.72% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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