Palo Alto Networks (PANW) Flagged As Strong On High Volume

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 Palo Alto Networks ( PANW) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Palo Alto Networks as such a stock due to the following factors:

  • PANW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $91.5 million.
  • PANW has traded 175,495 shares today.
  • PANW is trading at 3.51 times the normal volume for the stock at this time of day.
  • PANW is trading at a new high 3.07% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on PANW:

Palo Alto Networks, Inc. offers a network security platform in the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan. The company's platform comprises Next-Generation Firewall that delivers application, user, and content visibility and control. Currently there are 17 analysts that rate Palo Alto Networks a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Palo Alto Networks has been 1.4 million shares per day over the past 30 days. Palo Alto has a market cap of $6.6 billion and is part of the technology sector and computer hardware industry. The stock has a beta of 1.61 and a short float of 7% with 2.97 days to cover. Shares are up 47.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Palo Alto Networks 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 solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 48.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • PANW 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for PALO ALTO NETWORKS INC is currently very high, coming in at 76.67%. 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 -97.27% is in-line with the industry average.
  • 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 Communications Equipment industry. The net income has significantly decreased by 1913.0% when compared to the same quarter one year ago, falling from -$7.28 million to -$146.59 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 Communications Equipment industry and the overall market, PALO ALTO NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.

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