Splunk (SPLK) Marked As A Barbarian At The Gate

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 Splunk ( SPLK) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Splunk as such a stock due to the following factors:

  • SPLK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $224.7 million.
  • SPLK has traded 6.5 million shares today.
  • SPLK traded in a range 202.3% of the normal price range with a price range of $4.24.
  • SPLK traded above its daily resistance level (quality: 129 days, meaning that the stock is crossing a resistance level set by the last 129 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on SPLK:

Splunk, Inc. provides software solutions that provide real-time operational intelligence in the United States and internationally. Currently there are 14 analysts that rate Splunk a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Splunk has been 2.9 million shares per day over the past 30 days. Splunk has a market cap of $6.4 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.43 and a short float of 4.6% with 1.68 days to cover. Shares are down 21.5% year-to-date as of the close of trading on Friday.

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 Splunk as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, 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 Software industry. The net income has significantly decreased by 343.9% when compared to the same quarter one year ago, falling from -$13.69 million to -$60.78 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Software industry and the overall market, SPLUNK INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of SPLUNK INC has not done very well: it is down 5.87% 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.
  • SPLUNK INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SPLUNK INC reported poor results of -$0.75 versus -$0.39 in the prior year. This year, the market expects an improvement in earnings ($0.00 versus -$0.75).
  • The gross profit margin for SPLUNK INC is currently very high, coming in at 88.00%. Regardless of SPLK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SPLK's net profit margin of -59.85% significantly underperformed when compared to the industry average.

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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