Perilous Reversal Watch: Cornerstone OnDemand (CSOD)

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 Cornerstone OnDemand ( CSOD) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Cornerstone OnDemand as such a stock due to the following factors:

  • CSOD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $62.3 million.
  • CSOD has traded 232,092 shares today.
  • CSOD is down 3% today.
  • CSOD was up 7.4% yesterday.

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More details on CSOD:

Cornerstone OnDemand, Inc. provides cloud-based talent management solutions delivered as software-as-a-service. It offers four integrated clouds for recruiting, learning management, performance management, and extended enterprise. Currently there are 7 analysts that rate Cornerstone OnDemand a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Cornerstone OnDemand has been 1.1 million shares per day over the past 30 days. Cornerstone OnDemand has a market cap of $1.9 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.18 and a short float of 7.1% with 2.07 days to cover. Shares are down 26.4% year-to-date as of the close of trading on Monday.

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 Cornerstone OnDemand as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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 58.9% when compared to the same quarter one year ago, falling from -$9.93 million to -$15.79 million.
  • 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 Internet Software & Services industry and the overall market, CORNERSTONE ONDEMAND INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 4.35 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, CSOD has managed to keep a strong quick ratio of 2.16, which demonstrates the ability to cover short-term cash needs.
  • The share price of CORNERSTONE ONDEMAND INC has not done very well: it is down 9.27% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • CORNERSTONE ONDEMAND INC's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CORNERSTONE ONDEMAND INC reported poor results of -$0.79 versus -$0.63 in the prior year. This year, the market expects an improvement in earnings (-$0.24 versus -$0.79).

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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