Scientific Games (SGMS): Today's Weak On High Volume Stock

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

  • SGMS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.6 million.
  • SGMS has traded 491,356 shares today.
  • SGMS is trading at 6.55 times the normal volume for the stock at this time of day.
  • SGMS is trading at a new low 3.02% 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 SGMS:

Scientific Games Corporation provides technology-based products and services, and associated content for gaming and lottery markets worldwide. The company operates in three segments: Instant Products, Lottery Systems, and Gaming. Currently there are 4 analysts that rate Scientific Games a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Scientific Games has been 1.6 million shares per day over the past 30 days. Scientific Games has a market cap of $1.1 billion and is part of the services sector and leisure industry. The stock has a beta of 2.21 and a short float of 10.3% with 4.33 days to cover. Shares are down 21.7% 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 Scientific Games as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself.

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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 458.0% when compared to the same quarter one year ago, falling from -$12.98 million to -$72.40 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 Hotels, Restaurants & Leisure industry and the overall market, SCIENTIFIC GAMES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $23.80 million or 49.14% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • Although SGMS's debt-to-equity ratio of 14.27 is very high, it is currently less than that of the industry average. Even though the debt-to-equity ratio is weak, SGMS's quick ratio is somewhat strong at 1.41, demonstrating the ability to handle short-term liquidity needs.
  • The share price of SCIENTIFIC GAMES CORP has not done very well: it is down 8.19% 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.

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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