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 Yelp ( YELP) 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 Yelp as such a stock due to the following factors:
- YELP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $317.2 million.
- YELP has traded 8.1 million shares today.
- YELP is trading at 3.51 times the normal volume for the stock at this time of day.
- YELP 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. EXCLUSIVE OFFER: Get the inside scoop on opportunities in YELP with the Ticky from Trade-Ideas. See the FREE profile for YELP NOW at Trade-Ideas More details on YELP: Yelp Inc. operates as an online local guide that connects people primarily with boutiques, mechanics, restaurants, and dentists. Currently there are 16 analysts that rate Yelp a buy, no analysts rate it a sell, and 12 rate it a hold. The average volume for Yelp has been 3.7 million shares per day over the past 30 days. Yelp has a market cap of $4.5 billion and is part of the technology sector and internet industry. The stock has a beta of 2.68 and a short float of 18.2% with 1.08 days to cover. Shares are up 2.4% year-to-date as of the close of trading on Thursday. 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 Yelp as a sell. The area that we feel has been the company's primary weakness has been its disappointing return on equity. Highlights from the ratings report include:
- 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 Internet Software & Services industry and the overall market, YELP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for YELP INC is currently very high, coming in at 93.03%. 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 -2.92% is in-line with the industry average.
- Net operating cash flow has significantly increased by 472.37% to $9.32 million when compared to the same quarter last year. In addition, YELP INC has also vastly surpassed the industry average cash flow growth rate of 11.73%.
- YELP 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 this, the company maintains a quick ratio of 16.45, which clearly demonstrates the ability to cover short-term cash needs.
- This stock has increased by 229.59% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in YELP do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
- You can view the full Yelp Ratings Report.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.