Extreme Networks (EXTR) Is Today's Perilous Reversal 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 Extreme Networks ( EXTR) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Extreme Networks as such a stock due to the following factors:

  • EXTR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $19.0 million.
  • EXTR has traded 484,303 shares today.
  • EXTR is down 3.1% today.
  • EXTR was up 9.9% yesterday.

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More details on EXTR:

Extreme Networks, Inc., together with its subsidiaries, provides network infrastructure equipment and services for enterprises, data centers, and service providers. Currently there are 4 analysts that rate Extreme Networks a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Extreme Networks has been 1.6 million shares per day over the past 30 days. Extreme has a market cap of $568.0 million and is part of the technology sector and computer hardware industry. The stock has a beta of 1.45 and a short float of 1.5% with 0.41 days to cover. Shares are down 15.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Extreme Networks as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. 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:
  • EXTR's very impressive revenue growth greatly exceeded the industry average of 3.6%. Since the same quarter one year prior, revenues leaped by 96.3%. 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.
  • Compared to its closing price of one year ago, EXTR's share price has jumped by 50.55%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The gross profit margin for EXTREME NETWORKS INC is rather high; currently it is at 59.49%. 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 -10.77% is in-line with 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 Communications Equipment industry and the overall market, EXTREME NETWORKS 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 -$6.79 million or 762.82% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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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