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

  • CREE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $92.1 million.
  • CREE has traded 846,031 shares today.
  • CREE is down 3.1% today.
  • CREE was up 5% yesterday.

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More details on CREE:

Cree, Inc. develops, manufactures, and sells lighting-class light emitting diode (LED), lighting, and semiconductor products for power and radio-frequency (RF) applications in the United States, China, Europe, South Korea, Japan, Malaysia, and Taiwan. CREE has a PE ratio of 52.3. Currently there are 9 analysts that rate Cree a buy, 2 analysts rate it a sell, and 6 rate it a hold.

The average volume for Cree has been 2.2 million shares per day over the past 30 days. Cree has a market cap of $6.4 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.74 and a short float of 11.7% with 6.63 days to cover. Shares are down 15.5% 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 Cree 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 impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.9%. Since the same quarter one year prior, revenues rose by 16.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CREE 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 5.48, which clearly demonstrates the ability to cover short-term cash needs.
  • The net income growth from the same quarter one year ago has exceeded that of the Semiconductors & Semiconductor Equipment industry average, but is less than that of the S&P 500. The net income increased by 27.1% when compared to the same quarter one year prior, rising from $22.16 million to $28.16 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, CREE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • CREE has underperformed the S&P 500 Index, declining 24.51% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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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