Cornerstone OnDemand (CSOD) In A Perilous Reversal

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 $26.6 million.
  • CSOD has traded 170,914 shares today.
  • CSOD is down 3% today.
  • CSOD was up 5.4% 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 1 rates it a hold.

The average volume for Cornerstone OnDemand has been 870,300 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 1.17 and a short float of 7.9% with 6.70 days to cover. Shares are down 27.9% year-to-date as of the close of trading on Tuesday.

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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, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself.

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 91.5% when compared to the same quarter one year ago, falling from -$8.68 million to -$16.63 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.
  • Net operating cash flow has significantly decreased to -$8.16 million or 412.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 5.05 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 1.79, which demonstrates the ability to cover short-term cash needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.32%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 82.35% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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