RF Micro Devices (RFMD) Showing Signs Of Being Water-Logged And Getting Wetter

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 RF Micro Devices ( RFMD) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified RF Micro Devices as such a stock due to the following factors:

  • RFMD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $79.8 million.
  • RFMD has traded 4.6 million shares today.
  • RFMD traded in a range 215.6% of the normal price range with a price range of $0.49.
  • RFMD traded below its daily resistance level (quality: 7 days, meaning that the stock is crossing a resistance level set by the last 7 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on RFMD:

RF Micro Devices, Inc. engages in the design, development, manufacture, and marketing of radio frequency (RF) solutions for original equipment manufacturers and original design manufacturers in wireless and wired communications applications in the United States and internationally. Currently there are 8 analysts that rate RF Micro Devices a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for RF Micro Devices has been 10.7 million shares per day over the past 30 days. RF Micro Devices has a market cap of $2.3 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.09 and a short float of 4.9% with 1.55 days to cover. Shares are up 55.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates RF Micro Devices as a hold. The company's strengths can be seen in multiple areas, such as its 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 find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • RFMD's revenue growth has slightly outpaced the industry average of 5.2%. Since the same quarter one year prior, revenues slightly increased by 6.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RFMD's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.49, which illustrates the ability to avoid short-term cash problems.
  • 43.63% is the gross profit margin for RF MICRO DEVICES INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RFMD's net profit margin of 2.16% significantly trails the industry average.
  • RF MICRO DEVICES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RF MICRO DEVICES INC reported poor results of -$0.20 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus -$0.20).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, RF MICRO DEVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.

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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