Today's Weak On High Volume Stock: Cree (CREE)

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

  • CREE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $63.5 million.
  • CREE has traded 579,378 shares today.
  • CREE is trading at 5.67 times the normal volume for the stock at this time of day.
  • CREE is trading at a new low 4.02% 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 CREE:

Cree, Inc. develops, manufactures, and sells lighting-class light emitting diode (LED), lighting, and semiconductor products for power and radio-frequency (RF) applications in the United States, China, Europe, South Korea, Japan, Malaysia, Taiwan, and internationally. CREE has a PE ratio of 42.8. Currently there are 7 analysts that rate Cree a buy, 3 analysts rate it a sell, and 5 rate it a hold.

The average volume for Cree has been 1.7 million shares per day over the past 30 days. Cree has a market cap of $5.2 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.87 and a short float of 11.7% with 8.52 days to cover. Shares are down 31.7% 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 Cree as a buy. 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, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • CREE's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 16.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CREE 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 this, the company maintains a quick ratio of 4.53, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $91.14 million or 49.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.77%.
  • CREE INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CREE INC increased its bottom line by earning $1.01 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($1.86 versus $1.01).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Semiconductors & Semiconductor Equipment industry average, but is greater than that of the S&P 500. The net income increased by 5.7% when compared to the same quarter one year prior, going from $28.24 million to $29.85 million.

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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