K12 (LRN) Stock: Weak On High Volume Today

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 K12 ( LRN) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified K12 as such a stock due to the following factors:

  • LRN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $7.4 million.
  • LRN has traded 74,201 shares today.
  • LRN is trading at 5.85 times the normal volume for the stock at this time of day.
  • LRN is trading at a new low 5.02% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of 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 (or avoid losses by trimming weak positions). 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 LRN:

K12 Inc., a technology-based education company, offers proprietary curriculum, software systems, and educational services to facilitate individualized learning for students primarily in kindergarten through 12th grade. It manages virtual and blended public schools. LRN has a PE ratio of 36.2. Currently there are 4 analysts that rate K12 a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for K12 has been 375,800 shares per day over the past 30 days. K12 has a market cap of $695.6 million and is part of the services sector and diversified services industry. The stock has a beta of 1.37 and a short float of 16.9% with 8.29 days to cover. Shares are down 15.8% 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 K12 as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.

Highlights from the ratings report include:
  • LRN's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 14.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LRN's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.46, which clearly demonstrates the ability to cover short-term cash needs.
  • K12 INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, K12 INC reported lower earnings of $0.50 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.50).
  • 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 Diversified Consumer Services industry and the overall market, K12 INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • LRN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 50.84%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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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