Strong On High Relative Volume: Ubiquiti Networks (UBNT)

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

  • UBNT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.6 million.
  • UBNT has traded 217,949 shares today.
  • UBNT is trading at 2.98 times the normal volume for the stock at this time of day.
  • UBNT is trading at a new high 3.02% 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 UBNT:

Ubiquiti Networks, Inc., together with its subsidiaries, provides various networking products and solutions for service providers and enterprises in the United States and internationally. UBNT has a PE ratio of 23.5. Currently there are 6 analysts that rate Ubiquiti Networks a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Ubiquiti Networks has been 962,400 shares per day over the past 30 days. Ubiquiti has a market cap of $4.1 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 2.30 and a short float of 29.5% with 14.17 days to cover. Shares are up 2.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ubiquiti 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 impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • UBNT's very impressive revenue growth greatly exceeded the industry average of 3.3%. Since the same quarter one year prior, revenues leaped by 54.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although UBNT's debt-to-equity ratio of 0.22 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 7.68, which clearly demonstrates the ability to cover short-term cash needs.
  • Powered by its strong earnings growth of 71.87% and other important driving factors, this stock has surged by 40.03% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • 44.14% is the gross profit margin for UBIQUITI NETWORKS INC which we consider to be strong. Regardless of UBNT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, UBNT's net profit margin of 31.67% compares favorably to the industry average.
  • 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 Communications Equipment industry and the overall market, UBIQUITI NETWORKS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.

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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