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

  • CCIH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $30.3 million.
  • CCIH has traded 51,204 shares today.
  • CCIH is down 6.3% today.
  • CCIH was up 12.5% yesterday.

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More details on CCIH:

ChinaCache International Holdings Ltd. provides Internet content and application delivery services to businesses, government agencies, and enterprises in China.

The average volume for ChinaCache International Holdings has been 802,100 shares per day over the past 30 days. ChinaCache International has a market cap of $643.8 million and is part of the technology sector and internet industry. Shares are up 184.8% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates ChinaCache International Holdings 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 feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 16.5%. Since the same quarter one year prior, revenues rose by 35.2%. 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.
  • Although CCIH's debt-to-equity ratio of 0.09 is very low, it is currently higher than that of the industry average. To add to this, CCIH has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 36.08% is the gross profit margin for CHINACACHE INTL HLDGS -ADR which we consider to be strong. Regardless of CCIH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CCIH's net profit margin of -8.26% significantly underperformed when compared to the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 916.9% when compared to the same quarter one year ago, falling from $0.46 million to -$3.72 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market, CHINACACHE INTL HLDGS -ADR's return on equity significantly trails that of both the industry average and the S&P 500.

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